Energy and Climate Financing
Energy and Climate Financing

Finance will need to be mobilised at scale to support climate mitigation and adaptation in all sectors. The energy sector – which accounts for around three-quarters of global greenhouse gas emissions – will require the lion’s share of mitigation investments. Clean energy investment in emerging and developing economies will need to grow from USD 150 billion in 2020 to over USD 1 trillion per annum by the end of the decade to keep the world on track to a 1.5°C pathway1. The sector also faces a set of additional constraints to investment, compounding long-standing risks to infrastructure investment that exist across traditional infrastructure assets. The rapid pace of change in the sector, including the emergence of new technologies, makes the investment dynamic particularly complex, requiring careful consideration of where best to deploy scarce domestic and development finance, in a way that optimises the additionality of development finance, manages market failures, and is sensitive to local contexts. Meanwhile, we are already witnessing the worsening physical impacts of climate change. There is a need to mainstream adaptation into all relevant investments to ensure that new projects enhance resilience, rather than locking-in vulnerability to climate change impacts. Additional resources are needed for adaptation-related investments, such as protective infrastructure. The net benefits of investing in adaptation are significant: the Global Commission on Adaptation2 estimated that investing USD 1.8 trillion in adaptation would yield USD 7.1 trillion of benefits. Despite this strong economic argument, there is a lack of bankable projects because adaptation-related investments often do not generate the near-term revenues required to make them financially viable. Overcoming these challenges, both for clean energy and adaptation, will require new approaches by beneficiary countries, bilateral and multilateral donors, and the private sector. The G20 can play a unique role in convening these actors to assess current and future financing needs for climate action, and agree solutions to closing the global clean energy and adaptation financing gap, including by more effectively leveraging commercial finance. These discussions need to quickly filter down to the project level, where targeted investor dialogues can facilitate capital mobilisation by matching different public and private sources of finance to clean energy projects on the ground. The workshop will share best practices in the design of innovative financing solutions that have been effective in using limited public funding to leverage commercial finance for adaptation and mitigation investments. It will also discuss how the USD 100 billion climate finance commitment can be used more effectively to mitigate financing disparities.

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