Closing the climate investment gap in emerging and developing markets will take political will, according to a paper by the Net-Zero Asset Owners Alliance urging policymakers to help scale blended finance structures
If the world is to achieve the Paris climate goals and the UN Sustainable Development Goals (SDGs), policymakers must facilitate the scaling of blended finance structures to fund climate solutions, according to UN-convened Net-Zero Asset Owner Alliance (NZAOA).
In a paper calling on policymakers to act, NZAOA said blended finance structures would go a “long way to mobilising the flow of climate capital towards emerging markets and developing economies (EMDEs)”.
According to the alliance, blended finance solutions can help address the structural deterrence to investments in EMDEs, where the risk is normally too high for institutional investors.
Today, significant capital to finance clean technology, low-carbon infrastructure, sustainable business models and adaptation measures is readily available but not ending up in EMDEs or in the technologies that are most needed.
The potential of multilateral development banks (MDBs) and development finance institutions (DFIs) in mobilising private capital through blended finance is also significant.
Günther Thallinger, NZAOA chair and member of of the management board of Allianz SE, said in a statement: “Using blended finance structures is simply a win-win for the public and private sectors. While the private sector benefits from an improved risk profile, the public sector and the philanthropic community achieves a multiplier effect. At the core, this is not new, but it has been tested multiple times. We have before us an opportunity to incubate and scale investment to create substantial global impact. Let’s finally use this opportunity.”
In its call for action, the NZAOA makes a number of recommendations, including the need for creating sizeable and flexible pools of concessional capital to de-risk investments, modernising the governance and business models of MDBs and DFIs to align with the SDGs and Paris Agreement, among others.