Mobilise private sector to overcome climate finance challenge

Multilateral Development Banks (MDBs) can play key role in mobilising private sector to address climate finance challenge that will help reduce carbon emissions in line with the targets set by global leaders, says a senior official.

Konstantin Limitovskiy, Vice-President, Investment Operations (Region 2), Asian Infrastructure Investment Bank (AIIB), said AIIB recently released climate action plan highlights four key actions to resolve climate finance challenge.

He said significant financial resources and investments are needed to reduce emissions, accelerate adaptation to build resilience and preserve natural ecosystems.

“The AIIB and the COP28 Presidency are collaborating to mobilise much-needed climate investment capital and accelerate clean energy investments to address critical resource gaps in Asia and beyond,” imitovskiy told Khaleej Times during an interview.

Under the partnership, he said AIIB and the COP28 Presidency will co-develop innovative financial structures to scale up private and institutional capital mobilisation. Among them is the initiation of a new blended finance structure as part of shared efforts to drive capital into green initiatives.

Excerpts from the interview:

Climate Finance is a major concern in the fight against environmental issues. How can AIIB help resolve this challenge?

To achieve the necessary scale of climate finance, the focus must be on mobilising private sector resources. Multilateral Development Banks, or MDBs, including AIIB, have a key role to play in creating the right conditions for greater private climate financing, including increasing financeable opportunities, promoting carbon pricing, developing supportive policies and regulatory environments, utilising risk absorption capacity and developing innovative financing instruments.

Our recently released climate action plan highlights four key actions to resolve this challenge: scaling up AIIB’s own climate financing; enabling and mobilising greater direct private sector financing of mitigation, adaptation and nature solutions; mobilising large-scale private capital by promoting and developing viable climate markets; and creating partnerships with financiers and institutions to scale climate finance.

Why must MDBs triple their total cumulative climate finance within the next five years to prevent average global temperatures from reaching two degrees?

The impacts of climate change are already widespread and rapidly intensifying, while the window of opportunity to prevent the worst impacts of global warming is fast closing. Significant financial resources and investments are needed to reduce emissions, accelerate adaptation to build resilience and preserve natural ecosystems.

“To achieve this, we must first address a significant financing gap; a minimum of $4.3 trillion annually by 2030 is needed to keep to the objective of limiting global warming to 1.5°C; however, figures from the Climate Policy Initiative show that global climate financing reached only an average of $653 billion in 2019-2020.

Underinvestment in climate mitigation and adaptation measures – while high emission options continue to be financed – lessens the chances of meeting the objectives of the Paris Agreement. A lack of adequate financing also leaves many developing countries without the resources to transition to a low-carbon economy and adapt to the impacts of climate change.

Why has AIIB issued a new Climate Action Plan – a pathway to accelerated climate investment, enabling the bank to meet its climate financing targets (50% of its portfolio by 2025)?

The AIIB recently released its first Climate Action Plan (CAP) for the period to 2030. It is AIIB’s direct response to the global call for action. It articulates how, as a client-demand-driven financier, AIIB translates its climate ambition into key actions to meet the needs of its Members.

“The Climate Action Plan consolidates AIIB’s climate commitments as set out in its key strategies and policies, clarifies climate financing principles, and outlines key actions to guide AIIB’s investments in support of its Members. These principles include being responsive to client needs, being impactful through holistic sustainable solutions, strengthening co-financing partnerships, and promoting innovation.

The CAP is aligned with AIIB’s mission to finance i4t and includes a strong forward-looking focus to ensure AIIB financing is sustainable, holistic, promotes innovation and is flexible to meet changing needs.

Please share AIIB’s newly announced partnership with the UAE COP28 Presidency, established to mobilise the much-needed climate investment capital and accelerate clean energy investments to address critical resource gaps in Asia and beyond. This will include the co-development of innovative financial structure to scale up private and institutional capital.

The AIIB and the COP28 Presidency are collaborating to mobilise much-needed climate investment capital and accelerate clean energy investments to address critical resource gaps in Asia and beyond.

Under the partnership, AIIB and the COP28 Presidency will co-develop innovative financial structures to scale up private and institutional capital mobilisation. Among them is the initiation of a new blended finance structure as part of shared efforts to drive capital into green initiatives.

Both the COP28 Presidency and the AIIB will continue to jointly advocate for improvements in the multilateral development finance architecture and stronger institutional collaboration through operational support and knowledge exchange. Such collaboration reflects a strong commitment to maximize development impact, build greater momentum and achieve more through combined resources, expertise and influence.”

— muzaffarrizvi@khaleejtimes.com

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