Here's one more infographics from United Nations on Blended Finance.
Also a report from UN.
Would be great to hear from those members who have experience in blended finance.
Original Message:
Sent: 04-12-2023 14:02
From: James Doyle
Subject: Blended Finance – Infographics
The Second report of the Independent High-Level Expert Group in Climate Finance was published last week ahead of COP 28 outlines the increasing need.
The 2022 edition explained that a four-fold increase in climate finance was needed by 2030, to $2.4 trillion/yr. The latest report contains more such stunning figures, together with recommendations for how to raise the money:
- by 2030 we need x5 increase in concessional finance,
- a x3 increase in multilateral development bank (MDB) finance, and
- a x15 increase in private climate finance to emerging markets and developing economies (EMDE).
A summary of the key messages below and summary report can be found here- A climate finance framework: decisive action to deliver on the Paris Agreement - summary - Grantham Research Institute on climate change and the environment (lse.ac.uk)
Summary and Key messages
The COP26 and COP27 Presidencies, together with the UN Climate Change High-Level Champions, extended the mandate of the Independent High-Level Expert Group on Climate Finance (IHLEG) in July 2022, to prepare this second report for COP28. The IHLEG was tasked to help develop and put forward policy options and recommendations to encourage and enable the public and private investment and finance necessary for delivery of the commitments, ambition, initiatives and targets of the UNFCCC Paris Agreement, reinforced by the Glasgow Climate Pact, and the Sharm el-Sheikh agenda.
The full report is due to be published in early December 2023.
1. Finance with a purpose
- The Independent High-Level Expert Group on Climate Finance was tasked to assess how the climate finance system must change if it is to support the investment and actions necessary to deliver the goals of the Paris Agreement, within the broader goals of sustainable development. This is finance with a clear purpose.
- Our first report, published for COP27, focused on the amount of investment needed and how to deliver that finance. We concluded that around US$2.4 trillion of investment a year would be necessary by 2030 (in emerging markets and developing countries – EMDCs – outside China) across the priorities of a just energy transition, adaptation and resilience, loss and damage, and the conservation and restoration of nature. This is a four-fold increase from current levels devoted to these areas. The world is badly offtrack on the Paris goals, as the first Global Stocktake shows, the primary reason for which is insufficient investment in key areas, particularly in EMDCs.
- Despite the clear opportunity that this scale of investment would create for better and more sustainable growth, actual investment performance on key climate priorities in EMDCs has stalled. The focus of this report is therefore on acceleration and implementation.
2. The challenge of investment: acceleration and implementation
- We now need a much more purposeful approach with strong and committed engagement of all key stakeholders – countries, the private sector, the multilateral development banks (MDBs), donors and private philanthropy. Country leadership will be crucial and country platforms provide a promising way to bring together the main stakeholders.
- The first task is to act to unlock investment at scale through tackling impediments and buttressing institutional structures that can create investable pipelines of projects, anchored in a strategy of transformational change. This requires a shift from a do-it-alone approach to co-creation of investment opportunities and tackling obstacles with the combined involvement of countries, the private sector and development finance institutions.
- We must also tackle the immediate debt constraints and lack of fiscal space that are impeding the ability of many countries to invest, especially poor and vulnerable countries.
3. An integrated climate finance framework to deliver on the Paris Agreement
- Mobilising the scale and quality of finance to meet the large anticipated requirements will require an integrated approach that boosts all sources of finance – public and private, domestic and international – and uses their complementary strengths.
- Domestic resource mobilisation will be central, given its dominant role and importance in anchoring the macroeconomic sustainability of all finance. There is potential to boost tax revenues, including by harnessing new digital possibilities. Elimination of harmful subsidies and carbon taxation can generate much needed revenues to finance the transition.
- The role of the private sector in both investment and finance will be crucial and both domestic and international private finance must be boosted. International private finance to EMDCs for climate action will need to be increased by more than 15 times on current levels to deliver on climate mitigation goals.
- MDBs are key to both unlocking investment opportunities and mobilising finance, through own lending and catalysing private finance. They need to play a much stronger role in reducing, managing and sharing risk and in reducing the cost of capital. To deliver on the Paris targets, their role will need to change fundamentally and the scale of their support to triple by 2030. MDBs need to implement fully the recommendations of the G20 Expert Group on Capital Adequacy Framework to maximise capital efficiency, tap new sources of capital and guarantees to boost their immediate firepower, and secure strong shareholder support for regular capital increases to enable a sustained expansion of lending.
- Concessional finance is the scarcest and most vital source of finance for meeting urgent and high priority needs. A fivefold increase in concessional finance is needed by 2030. Developed countries must lead by tripling the amount of bilateral concessional finance by 2030, but concessionary finance cannot be provided at the right scale with bilateral official development assistance (ODA) alone. We must therefore pursue all options, including carbon markets (compliance and voluntary), expanded rechannelling of special drawing rights, international taxation and a bigger role for philanthropy, including from the corporate sector.
- These four sources of finance – from domestic public resources, the private sector, MDBs, and concessional – are mutually supportive and different combinations will be necessary for different investments and activities. The method of combination will be critical, as well as the overall total.
4. Seizing the opportunity – and the consequences of success or failure
- Momentum has been building over the past year to refine the elements of a more effective framework for climate finance. It is crucial to seize the opportunity at COP28 to secure a breakthrough and to put in place an action plan to deliver on this framework.
- Failure to generate investment and finance of the scale and nature required is to fail on Paris. The consequences would be devastating, particularly for the poorest people. Seizing the opportunity would unlock the growth story of the 21st century. This is truly finance with a purpose.
The Independent High-Level Expert Group on Climate Finance (IHLEG) is co-chaired by Vera Songwe and Nicholas Stern, and Amar Bhattacharya is the Executive Secretary of the group.
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James Doyle
Director, Green Finance, Investment Management
Original Message:
Sent: 03-12-2023 09:26
From: David Manuel
Subject: Blended Finance – Infographics
Will be interesting to see if COP28 has any initiatives to encourage the scaling of blended finance solutions. Might be as will all COP28 pledges and words but the role of blended finance in its many gueses is central to doing the investments needed to initiate long term solutions and finance the elements that are for common good.
Interested to know what initiatives people are aware of?
What schemes they hope to see from COP28's get together?
If we are to move to a sustainable world economy the vast majority of capital can naturally rotate to sustainable commercial operations and assets. Over the life span of assets and product cycles this is not a huge stretch the NEED is to accelerate the cycles to avoid as much warming as possible. However maintaining the societal structures, health and short term wellbeing of regional societies while we adjust and change is filled with uncertainty for investment returns, remedial and public good expenditure. Where established cost benefit analysis and channels of funding exist they need to be scaled, where there is a lack they must be established. Blended finance has been used to mitigate many types of risk and allow private money to leverage the "for good" or some other non financial outcome return funding with a viable business model itn is an established, useful and proven way to stimulate commercial funding. Be the blended finance taking first loss risk or specifically funding elements of a project or integrated transition plan it has a key role in kiick starting, proving and accelerating solutions. In the same way forms of finance are used to stimulate technological and small business creation among other policy objectives it is needed to finance pilots of solutions that can be used as proof of concept in delivering desireed outcomes and encourage the bulk of financial capital to follow when there is confidence in delivering desired outcomes both financial and for common and planetary good. GFANZ illustrated the bulk is there for "investable projects" blended finance whether from MDBs, governments, philanthropy or special global transition funds. Policy initiatives, fiscal regulatory and directed funding needs to be scaled and supported with a clear narrative so the resource redistribution is accepted by society. Governments and private foundations have experience and this finance can be grants, soft loans or catalytic capital but it does need to be scaled and have co-ordination and not be directed to specific favoured silos of interest that would fail to solve the systemic problems with lopsided allocations compared to more effective allocation for systemic outcome. An example would be the evolution of solar and wind power where the techniocal and manufacturing scaling recieved support and triggered mass investment but issues like grid connectivity and distribution infrastructure investment seem neglected and currently represent a serious bottleneck in realising the benefit of allocated capital. Blended finance combines with commercial finance at the project level but needs "joined up thinking" and "leadership buy-in" at a macro scale to really deliver the road to a sustainable future.
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David Manuel
Partner
Original Message:
Sent: 01-12-2023 10:29
From: James Doyle
Subject: Blended Finance – Infographics
Good post Aya - role of Blended Finance also mentioned in the recent UK Parliament's Environmental Audit Committee (EAC) - report in to the The financial sector and the UK's net zero transition - Environmental Audit Committee (parliament.uk)
A copy from the summary of the report:
Investing for net zero
Securing and monitoring financial investment along the pathway to net zero is essential in attracting private capital. One potential method is the use of 'blended finance' approaches, which combine different sources of private and public investment. The UK Government referred to various methods of blended finance in its Green Finance Strategy, not least the UK Infrastructure Bank (UKIB), which we heard creates £4 of private capital for every £1 of public funding invested in regional growth and tackling climate change. We urge the Government to keep to its ambition of setting out its future plans for net zero blended finance solutions by the next spending review.
Full Report (overview)
The full report contains a lot more from its inquiry on the financial sector and the UK's net zero transition and finds that "ambitious commitments", including the Net Zero Asset Managers commitment, "risk being undone through mixed messaging from the Government".
At its launch in May 2022, the inquiry appeared focused on the policies and approaches of financial institutions, including the work of the Glasgow Financial Alliance for Net Zero (GFANZ). The report includes commentary on financial institutions' policies regarding the phaseout of fossil fuels, but its focus is now on Government leadership and the need for a robust policy framework to stimulate private investment.
The EAC's recommendations include:
- Making transition plans mandatory for companies while introducing a mechanism to effectively monitor and evaluate their effectiveness.
- Phasing in compulsory TNFD-aligned nature reporting over the next three to five years.
- An independent body to be tasked with tracking climate- and nature-related financial flows, as well as investment in high-carbon projects.
- The EAC also repeats earlier recommendations for a Carbon Border Adjustment Mechanism to be implemented as soon as possible.
In the meantime, the UK Governments response to the Climate Change Committee 2023 in adaptation progress report, outlines the measures of what progress has been made/ work ongoing Government response to the Climate Change Committee 2023 adaptation progress report - GOV.UK (www.gov.uk)
Executive summary:In July 2023 the UK government published its third National Adaptation Programme, setting out a commitment to take clear and decisive action over the next 5 years to maintain our country's resilience to the impacts of climate change.
This report sets out the progress government has made over the past 2 years in adapting to climate change, in line with the CCC's recommendations. Key actions include:
- Nature – 13 Environment Act long-term targets, accompanied by shorter interim targets, to drive long-term improvement in nature and the environment. Defra has set interim biodiversity targets for 2028 that embed consideration of adaptation into their delivery, including to restore or create 140,000 hectares of wildlife-rich habitats outside protected sites, compared to 2022 levels.
- Working lands and seas – designation of the first 3 Highly Protected Marine Areas (HPMAs) in England, granting the greatest protection in our seas. Through our £270 million Farming Innovation Programme, we are working with farmers, growers and the research community to develop innovative methods and technologies such as carbon-capture cropping and precision breeding for crops and livestock.
- Food security – putting food security at the heart of the government's vision for the food sector through the government's food strategy.
- Water supply – producing regional water resources plans for the first time to inform Ofwat's 2024 Price Review and bring collaboration between water companies.
- Energy security – DESNZ will designate parties responsible for the maintenance of energy sector codes and standards with a clear mandate to build climate and weather resilience by 2024.
- Telecommunications and ICT – DSIT is developing a stronger risk management framework for data centres and data storage and processing infrastructure, and will consult industry on this in due course.
- Transport – DfT is developing a transport adaptation strategy and will seek to consult on this strategy by the end of 2023.
- Towns and cities – helping local planning authorities and developers to create or improve green and blue infrastructure at a local level through the Green Infrastructure Framework: Principles and Standards for England.
- Buildings – a new DESNZ Homes for Net Zero research programme to provide ongoing monitoring and longitudinal data on temperature in a representative sample of the existing building stock. The second phase of this project aims to provide a testbed to monitor the effectiveness of different overheating adaptation measures.
- Health – National Health Service (NHS) Green Plans are in place for all NHS Trusts and Care Boards, setting out key plans for sustainability and climate resilience. Guidance for NHS Green Plan development will be updated next year, including strengthening existing climate adaptation provisions.
- Business – DBT will publish the Critical Imports Strategy this year, to strengthen our ability to respond to threats to critical imports, such as from the impacts of climate change.
- Finance – delivering the Green Finance Strategy 2023, which sets out a range of actions being taken to protect the financial system from climate-driven impacts and to attract private investment into adaptation.
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James Doyle
Director, Green Finance, Investment Management
Original Message:
Sent: 29-11-2023 09:47
From: Aya Pariy
Subject: Blended Finance – Infographics
Why is blended finance important for private investors?
I have been reading lately about blended finance as it is emerging as one of the important pathways towards a healthier planet and society. Here's what I've learned.
Blended Finance provides a mechanism to leverage public and philanthropic funds to attract additional private capital. Some key reasons why blended finance is important for private investors include:
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§ Risk Mitigation<o:p></o:p>
§ Enhanced returns<o:p></o:p>
§ Catalysing private investment<o:p></o:p>
§ Alignment with impact goals<o:p></o:p>
§ Access to new markets<o:p></o:p>
§ Innovation and experimentation<o:p></o:p>
§ Long-term stability<o:p></o:p>
§ Global development goals<o:p></o:p>
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Sharing infographics on blended finance as well which you can download from our Library.<o:p></o:p>
What is blended Finance? From Access, The Foundation for Social investment<o:p></o:p>
Have you participated in blended finance, what is your experience?
If not, can blended finance be a future opportunity for your company?<o:p></o:p>
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Aya Pariy
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