26-May-23 ESG

Dialing up climate finance to emerging markets

How World Bank reforms might help attract more private sector capital, which is urgently needed to meet greenhouse gas emission targets

In many emerging markets, clean energy investment per capita has been lagging

* Estimated as of June 2022

Sources: International Energy Agency (IEA) June 2022, World Energy Investment 2022, DWS Investment GmbH as of 5/23/23

However, the election of Ajay Banga as the new World Bank President offers a fresh chance to put climate change at the center of the organization’s lending strategy for middle- and low-income countries.[1] For example, using the balance sheets of multilateral development banks in providing first loss provisions might help to crowd-in private sector capital. In addition, many emerging markets are faced with the need for debt relief, at the same time as trying to address climate change. One solution could be linking renewable energy projects with concessional loans or grants to those countries who need them most.

According to IEA, annual investments in energy infrastructure of EMDE (excluding China) alone would have to amount to at least US$1 trillion by 2030, in order to mitigate the effects of climate change and reduce greenhouse gas emissions.[2]

To sum up, reforms at the World Bank have the potential to put the issue of climate finance to emerging markets at the top of the agenda. That would better align organization’s lending strategy with the growing net zero commitments among developing countries. It could also help boost private sector climate financing which has become a key metric for measuring climate progress.

Read more

Discover more

1. UN (22 September 2022). Barbados Prime Minister Mottley calls for overhaul of unfair, outdated finance system https://news.un.org/en/story/2022/09/1127611

2. Financing Clean Energy Transitions in Emerging and Developing Economies – IEA Special Report (2021)

CIO View