Michael Lewis, Head of ESG Research at DWS, shares his comments as follows after last week’s New Global Financing Pact Summit took place in Paris:
“Last week, the New Global Financing Pact Summit took place in Paris. The aim was to inject momentum to reinvent the global financial system to help low-income countries cope with climate change. The summit brought together the climate, biodiversity, development and just transition agendas under one roof, finally recognizing the interdependencies between all these issues. From our perspective, the most vital part of the summit was the ways in which climate and border sustainability linked financing to emerging markets can be scaled-up.
The answer to this question is now more urgent than ever. The COP 15 target set in 2009 for climate financing to developing countries to reach US$100 billion by 2020 has only just been reached, three years behind schedule. However, it is not just the speed of reaching these targets that is a significant problem, but also the level of capital since investments in emerging market energy infrastructure alone must hit at least US$1 trillion by 2030. This puts into sharp focus the daunting task that lies ahead.
No wonder then that last week’s official announcement by Senegal and the International Partners Group to mobilize €2.5 billion for renewable energy deployment raises some hope. This could be the start of an increasing number of such public-private partnerships following similar Just Energy Transition Partnerships announced by Indonesia, India, Vietnam and South Africa over the past few years.
All eyes will now be fixed on the next round of discussions relating to reforms to the international financial system which will take place at the IMF and World Bank meetings this September in Washington D.C.. Unlocking the balance sheets of multilateral development banks has now moved to the top of the policy agenda. This is because the use of first-loss provisions and the de-risking of such investments may prove the most effective way of crowding in private sector capital to deliver on climate and development goals.”