A significant push is still required to meaningfully improve the scale, quality and pace of investment and finance for projects supporting the climate change agenda, particularly in developing countries, according to the latest Assets to Flows report, launched today at COP28.
Whilst average annual climate finance flows almost doubled to US$1.3 trillion in 2021/22, as compared to 2019/20, the flows still only represent 1 percent of global GDP; and barely US$30 billion, just 2 percent of the total, flowed to developing countries. Not enough finance is getting to the people and places that need it most – invariably, vulnerable communities across the Global South – the same communities which have the potential to generate a disproportionately positive impact on global climate objectives.
The Regional Platforms for Climate Projects (RPCP) is an initiative designed to accelerate climate action and advance the United Nations Sustainable Development Goals (SDGs), to catalyze capital to flow to the places that need it most. It is an initiative centred principally, but not exclusively, on delivering a series of regional forums and ongoing “matchmaking” sessions, where project proponents have the opportunity to present their projects and climate related initiatives to as broad a universe of relevant financiers and investors with capital to deploy, be they private or public, debt or equity, commercial or philanthropic.
This year’s work and Assets to Flows Report II report was informed by the insight from the first round of forums in 2022, captured in the initial Assets to Flows report published at COP27. The second edition of the forums focused on a shortlist of projects drawn from those sourced during the course of the first edition and subsequent activity, with discussions more detailed and specific.
Major themes and findings on what it takes to successfully secure financing that emerged from each of the second editions of the five regional forums — held, this time round, in Abidjan, Bangkok, Dubai, Frankfurt and Santiago — were similar to those that emerged last year. Most notable amongst these at the macro level are: the need for both proponents and financiers to adopt a collaborative and holistic approach to climate and sustainable development needs, the criticality of a supportive enabling and regulatory environment, the importance of engaging domestic financial institutions, the need to focus on innovative finance tools, and the need for robust technical assistance programmes that can help support and develop the capacity of project owners and countries to implement their national priorities via accredited entities.
No less important is the need for project proponents to engage early with the private sector, recognizing the value that they can bring to problem solving and structuring, as pools of expertise and not only capital. It is critical, particularly for projects seeking commercial funding, to provide robust business propositions for them to be positively considered, underpinned by important information such as sources and amounts of capital invested, capital requirements, target gearing, contractual structures, detailed project timelines and climate impacts. To this end, the Financing Factsheet , a practical tool developed by the Climate Champions Team (CCT) alongside the initial Assets to Flows report for project proponents to draw on to collate information needed, remains valid and available for use.
Finally, the need for projects to be able to build and maintain a monitoring, reporting, and verification system which allows them to accurately track finance flows, and to assess and communicate the results of the projects funded is also incredibly important to financiers and investors.
In aggregate, the 2023 forums attracted over 900 participants, with almost 200 organizations represented. These included multilateral development institutions, local, regional and global banking groups, institutional investors, corporates, philanthropic foundations and non-governmental and civil society organisations.
The shortlist of projects from which the projects showcased during the forums were drawn is included in this year’s report. It is derived from a pool of over 450 opportunities with an aggregate funding requirement in excess of US$500 billion. Projects shortlisted were assessed primarily on their level of readiness to be involved in investment deals and engage with capital providers, with robust assessment criteria including depth and quality of information, project maturity, effective impact and sponsor credibility. The shortlist features 63 opportunities from 35 countries from across the globe requiring in aggregate approximately US$80 billion of financing. The opportunities span across multiple sectors, with a notable focus on energy (40 percent). Additionally, there are significant opportunities in transport (13 percent) and agriculture (11 percent), highlighting a broad spectrum of potential avenues for growth and investment. In assessing impact, a notable 63 percent of projects actively bolster mitigation efforts, while 29 percent are dedicated to fortifying adaptation and resilience. This imbalance points to the urgent need to address challenges facing the development of climate adaptation projects.
A total of 19 projects that either featured in the Climate Champions’ Extended Compendium of Climate-Related Initiatives or formed part of the shortlist curated during 2023 have raised financing. Several of these, together with some which have yet to secure financing, but which demonstrate heightened potential for doing so, feature as illustrative case studies in the report – in some cases with accompanying short videos. These projects span a diverse range of opportunities from agricultural land regeneration, e-mobility, green hydrogen, water desalination and a number of renewable energy developments, lending substance to the belief held by the UN Climate Change High-Level Champions and related stakeholders that impactful, credible and financeable projects, including in the developing world, do exist.
Finally, the report also signposts some of the key complementary initiatives to have developed either as a direct product of, or in parallel to, the RPCP work over the course of 2023, including the Africa Carbon Markets Initiative, the GFANZ Africa Network, the Mobilising Private Capital for Nature to Meet Climate and Nature Goals report authored by the CCT, the Centre for Global Commons (CGC) at Tokyo University, and Systemiq, and the renewed mandate of the Independent High-level Expert Group on Climate Finance.
In summary, whilst project pipelines needed for climate and the SDGs cannot be created overnight or by any one actor, the RPCP initiative has demonstrated that regional priorities are known, that there are a myriad of funding requirements across the various development stages or life-cycle of projects, and that when financiers and project proponents are willing to engage positively, supported by governments, the well-known barriers can be overcome. The RPCP represents an effective bridge and insight into how to catalyze assets to flows.
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