British International Investment (BII) said it would unveil new investments and partnerships at COP29 to mobilise private capital into climate finance.
The announcements come in the wake of BII unveiling a number of innovative new initiatives to encourage private investors to commit capital to those countries that are most vulnerable to the climate emergency. These include a new concessionary capital facility designed to de-risk institutional capital in funds and new social or green bond issuances.
Between 2021 and 2023, BII has been responsible for mobilising $1.12 billion of private capital into climate finance projects. Private investors, which collectively manage trillions of dollars in assets, have been reluctant to commit capital to climate finance in emerging economies because of the perceived level of risk that such investments entail.
Macro factors such as local currency volatility, political instability and regulatory restraints are often cited as embedded reasons for not investing in countries that are most vulnerable to the impacts of the climate emergency.
The International Finance Corporation (IFC) and the European Investment Bank (EIB) recently unveiled new credit risk data from the IFC’s Global Emerging Markets Risk Database spanning more than 30 years and 15,000 private-sector loans worth more than $500 billion to companies in developing economies. It showed that default rates in emerging markets are much lower than commonly perceived.
The chief executive designate at BII, Leslie Maasdorp, said, “BII and other DFIs are innovating to generate opportunities for private institutions; to de-risk investments so that capital is allocated to where it is needed most.
“Private investors: Our doors are open. Speak to us. Explore the opportunities that DFIs can bring to your door. Interrogate the risks that we can help to mitigate. And then by COP30 we will have significant progress to report.
“The United Nations Conference on Trade and Development estimates that developing economies need between $3.3 trillion and $4.5 trillion in annual investment to meet their Sustainable Development Goals. But at current financing levels, it says there is an annual financing gap of some $2.5 trillion.
“Of the up to $600 billion per year of private capital that is needed to finance the green transition, more than half needs to be supported or ‘catalysed’ by MDBs, DFIs and other bilateral financial institutions,” Maasdorp pointed out.
