EM Adaptation Gap High on COP28 Agenda

Rising recognition of the vulnerabilities of EMDEs to climate change is increasing focus on scaling blended finance opportunities. 

COP28 in Dubai will explore climate adaptation investment opportunities for public-private partnerships in emerging markets and developing economies (EMDEs), according to COP27’s UN Climate Change High-Level Champion.  

“COP26 highlighted the importance of businesses and the private sector to [international climate progress] with the launch of coalitions like the Glasgow Financial Alliance for Net Zero (GFANZ),” said Dr Mahmoud Mohieldin, speaking at a London Stock Exchange Group (LSEG) webinar on 8 November. 

“COP27 emphasised this, but also considered the importance of partnerships with multilateral development banks (MDBs), like the World Bank, [and]highlighted that EMDEs need finance for climate adaptation.” 

The Sharm El Sheikh Adaptation Agenda was published at COP27, mapping an ambitious plan to drive public and private investment toward 30 adaptation outcomes by 2030 across sectors and highly vulnerable communities. 

It also included the introduction of the Loss and Damage Fund, which aims to help the most climate vulnerable EMDEs cover the costs of climate change’s physical impacts. Discussions on how it will work in practice have been ongoing. 

In part to drive progress in achieving the COP27 agenda, there will be an increased focus on climate transition investment opportunities for blended finance in emerging markets at COP28, Mohieldin said, pointing to the COP28 Presidency’s September announcement of a UAE finance initiative – which will contribute US$4.5 billion to Africa’s energy transition – as an example of the increased focus on supporting EMDEs.  

“Around 2% of private sector finance is currently going to climate adaptation investments – the resilience of infrastructure, protection of forests, dealing with deforestation, investing in water management – which of course isn’t enough,” said Mohieldin, who is also UN Special Envoy on Financing the 2030 Sustainable Development Agenda. 

Earlier this month, the UN Environment Programme (UNEP) published its 2023 ‘Adaptation Gap Report’, which highlighted that EMDEs’ forecast climate adaptation finance needs are now ten to 18 times larger than existing international public flows. The finance gap stands at between US$194-US$366 billion a year, the report noted. 

According to Mohieldin, it is paramount COP28 now moves from “talking about general frameworks to getting into the specifics”, he added. 

The fulfilment of the US$100 billion a year to EMDEs climate funding commitment made by developed countries back in 2009 also remains important, Mohieldin said.  

“Not because it’s a panacea to all our problems, but it’s a token of trust and could be used for leveraging private sector finance or supporting important funds like the Green Climate Fund (GCF).” 

The UN-run GCF provides financial support for low- and middle-income countries across climate mitigation and adaptation themes.  

It has a Private Sector Facility (PSF) which serves as a dedicated division funding and mobilising private sector actors, including institutional investors, through concessional instruments, such as guarantees, first-loss protection and grant-based capacity-building programmes. It currently has US$4.8 billion invested across 54 private sector projects, which have a combined portfolio value of US$22.1 billion. 

Race against time 

Funding gaps slowing the transition from fossil fuel-intensive energy to renewables across EMDEs urgently need to be filled, Mohieldin emphasised.  

“We are in a world that has 800 million people without access to electricity, with 600 million of them in Africa,” he said.  

According to the International Energy Agency (IEA), US$4 trillion needs to be invested in renewable energy globally every year by 2030 to achieve net zero by 2050. At least US$1 trillion of this needs to be annually invested in EMDEs. 

There is ample investment opportunity, he noted. Latin America and the Carribean have one of the cleanest electricity sectors in the world, according to an International Energy Agency (IEA) report published this month, noting that renewables generate 60% of the region’s electricity – twice the global average. To fulfil the region’s pledges, financing for clean energy projects needs to reach US$150 billion by the end of the decade and increase fivefold by the mid-century. 

“If we are serious [about addressing climate change], we should stop the use of coal now and we need to significantly cut the use of oil and natural gas,” Mohieldin said.  

“We need to invest in renewables – solar, wind, green hydrogen – we need to cut the emissions, and we need to deal with the socioeconomic impact on society, especially for those who have been dependent for years on fossil fuels.” 

In October, the IEA published a report warning that greater policy attention and investment was needed to ensure electricity grids globally can support the climate transition. Annual investments in grids needs to double to more than US$600 billion a year by 2030, the report said. 

In a September communique, the Group of 20 (G20) leaders said they would “pursue and encourage” efforts to triple renewable energy capacity globally by 2030, recognising the needs, vulnerabilities and priorities of EMDEs and committing to work towards facilitating low-cost financing to support their energy transitions. 

“We are in a race against time to cut emissions by 50% between now and 2030,” Mohieldin said.  

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