Innovations in Climate Finance to Achieve Scale, Speed and Impact

This plenary aims to identify the three biggest challenges in mobilizing climate finance, call attention to the ‘actionable agenda items’ which define what needs to be done —under each of these three broad areas.

1. Urgency and Scale of Climate Finance Needs:

As emphasized in the 2018 IPCC special report on global warming of 1.5oC, the urgency of climate action is growing rapidly. The rate of mitigation and adoption of clean technologies is quite slow. Countries simultaneously face rising costs of adaptation and loss and damage from extreme events such as increasing droughts, storms and floods are causing rising and enormous catastrophic losses, putting insurance and risk management industries at a huge disadvantage. Finance is a key enabler and driver of scale, speed, technologies and transformations possible.

  • How big is the scale of additional financing needs for mitigation between 2020-30 to get us to a safer limit to global warming (1.5 degree) and what key innovations are possible for developing countries to access larger-scale, lower-cost, and longer-maturity mitigation finance?
  • How big is the scale of adaptation finance needs, and how can these be met, through what innovations?

Innovations to Spur New Models of Public-Private Partnerships and Climate Financial Markets Development

The world has excess savings, and the problem may not be the global absence of capital — but better mechanisms to re-deploy such capital than the current architecture allows. Existing modes of international climate finance negotiations are in a quandary, increasingly questioning international transfers, while domestic pressures on public finances are rising everywhere (cutting taxes, higher deficits, expenditure reduction, and political economy pressures against carbon taxes, etc.).
  • With the likelihood of a global slowdown in jobs and incomes and rising risk-aversion in financial markets, how can climate finance innovations in private financial markets within a new public-private innovation space build a stronger positive role?
  • How can this be done in settings such as global (climate) bond markets, banking sector, and equity markets to access capital for increasingly crucial role of ‘smart’ urban infrastructure, climate resilient infrastructure, new technologies and investments in energy and transport infrastructure (public mobility, energy storage, electric cars), and smaller communities’ access to adaptation investments (water, agriculture, energy)---all led by innovative models of private-public partnerships?
  • How can the design of ‘bankable’, innovative and scaled up project proposals be accelerated (similar to past successes in wind and solar energy) to a broad range of sustainable infrastructure projects?
  • What role can innovations play in national and international public climate finances in such a setting? Can sovereign guarantees play a bigger role in spurring private investment in mitigation? How can we release more public grant resources for the most pressing public goods actions needed in adaptation? What kinds of designs work best in ‘crowding-in’ private insurance mechanisms, and how should grant resources be used for expanding such schemes in difficult to reach and climate vulnerable sectors?

Innovative Institutions: Redefining the roles of Climate Agencies, MDBs, Central Banks and Regulators

The multilateral development banks (MDBs) and specialized climate finance institutions (GCF, GEF, DFIs within countries) occupy the crucial ‘middle-space’ linking the practical public finances and policies, and private financial markets and actors.
  • What is the next step of innovations possible in these agencies? Is the raising of new capital helping? How should they ‘crowd-in’ more private investments and financing? Should they alter their existing direct funding models and include more explicit ‘outcome’ targets, and improving their ‘multipliers’ of action? How should they design ‘policy support’ in climate finance?
  • How should central banks, financial regulatory agencies, credit rating agencies, and insurance regulatory agencies spur the increasing urgency in climate finance actions? How do they persuade financial players to not only reduce their risks in existing ‘stranded or unsustainable assets’, but cross over to positive actions needed to spur greater private investments in sustainable actions?
  • Should central banks start to play a bigger positive role in their guidance to financial sectors and banks? Should regulatory agencies start to assign greater positive weights to sustainable investments? Should there be market-based prices for carbon remediation assets and insurance actions for adaptation? How would a ‘step-by-step’ approach encourage carbon pricing in smaller increments that are politically more acceptable than the larger changes which have seen political economy constraints across many geographies?