01 October 2019
At the recent UN Climate Action Summit, the Climate Finance Leadership Initiative set out the challenge facing the growth of renewables in emerging markets: while renewable investment is growing steadily, and while renewables are often the lowest cost form of new power generation, little private capital is flowing to countries defined as ‘low-income’ by the World Bank. In fact, these countries saw only 0.1% of total clean energy investment from 2009 to 2018.
Unpicking this challenge shows that often the risks are perceived as too high for private investors and progress is reliant on public finance. Public finance is, however, in short supply. To deliver the ambitions of these emerging countries, and to meet the commitments made to support the Paris Agreement, greater flows of private capital are needed. Achieving that requires a strong local enabling environment and the right institutional structures.
Institutional structures can include domestic commercial banks and development banks, development finance institutions and multilateral banks, and government ministries responsible for financial and climate policies. With a common goal to tackle climate change, together they can achieve a lot.
Over the past five years, we’ve seen attention increasingly turn to the role of green finance institutions in accelerating and scaling up climate finance. Green financial institutions are capitalised with public funds, created specifically to facilitate and accelerate public and private partnerships and investment into green, climate resilient infrastructure. Despite their relatively novel nature, they’ve already developed a strong track record, deploying around US$11 billion for projects with a total value of more than US$41 billion to date according to the Green Bank Network.
The Mongolian Green Finance Corporation is designed to unlock this potential and support Mongolia’s low carbon transition by scaling up and accelerating investment into green energy and energy efficiency projects, tackling the dual challenges of climate change and air pollution. As part of this work, the Corporation will also work with the Mongolian financial services sector to build domestic capability in green finance.
The climate crisis is the greatest challenge of our time. Green finance institutions can play a valuable role in accelerating the global transition to a greener economy, and I’m incredibly excited by the opportunity to share GIG’s first-hand experience with countries around the world.