He said: “Up until today there was not enough money in the world to fund the transition… Right here, right now is where we draw the line. The $130tn is more than is needed for the net-zero transition globally.
This announcement, however, carries a major challenge: making sure these trillions reach the people who need it. And this is where development finance comes into play, in Amin’s view.
Amin, who had a 10-year career working on sustainable energy and climate change in the UK government before becoming chief of climate change at the Inter-American Development Bank, joined CDC Group – which is to be renamed British Investment International in March – in 2020. She is also a senior advisor at COP26.
In an interview with Pioneers Post following COP26, she says: “The next couple of years are going to be a really important time in terms of ensuring development finance, in particular, is able to really bring in all this private capital that is now making commitments to be net zero… where it is most needed, in terms of development needs.”
At the conference, Mark Carney, UN special envoy for climate action and finance, announced that 450 financial institutions collectively managing $130tn of private capital – people’s pensions, savings and investments – had joined the Glasgow Financial Alliance for Net Zero (GFANZ), committing to reach net zero emissions by 2050.
“Make no mistake, the money is here. If the world wants to use it.”
What is climate finance?
The UN describes climate finance as local, national or transnational financing – drawn from public, private and alternative sources of financing – that seeks to support mitigation and adaptation actions that will address climate change. Climate finance is needed for mitigation (limiting global warming by reducing CO2 emissions), because large-scale investments are required to significantly reduce emissions. Climate finance is equally important for adaptation, as significant financial resources are needed to adapt to the adverse effects and reduce the impacts of a changing climate.
Adapting to climate change “Climate change is the biggest threat to the poorest people in the world,” says Amin. “If we don’t do enough to tackle climate change, the richest countries and the richest people in those countries will be able to somehow survive on this planet. But it will be, and already is, the poorest people who are suffering most. That’s the biggest climate injustice that we face.”
Right now, the countries already feeling the impact of climate change – most are among the poorest in the world – need investment to adapt and become more resilient to current and future climate threats. More private investment – especially now that $130tn are available – needs to be mobilised towards climate adaptation solutions to better face climate risks such as the floods, storms, extreme heat and droughts that are already decimating communities. Development finance institutions (DFIs), as impact investors, can play a catalytic role. In the next few years, the focus on adaptation is going to be critical
At COP26, developed countries committed to double climate adaptation finance by 2025 compared with 2019 to $40bn a year, a first in the UN process. But, while she welcomes this news, Amin warns that solely focussing on the amount of finance invested isn’t enough – impact measurement is crucial. “You’re just measuring finance that’s approved… and there isn’t really any assessment of whether it has delivered resilience over time,” she says. She adds: “[Focussing on input] also doesn’t necessarily send the right incentives, because the incentives are to get the biggest finance numbers possible, whereas that may or may not be the most effective solution.”
Examples of adaptation projects that CDC has invested in include Roserve, a company that provides waste water treatment for businesses likely to face water scarcity due to extreme droughts in India. CDC has also worked with a renewable energy company on a mangrove rehabilitation programme to protect a coastal wind farm from rising sea levels in Pakistan. “Certainly in the next few years, the focus on adaptation is going to be critical,” says Amin. “And that’s an area that has obviously very strong implications for the development finance community.” Since 2020, CDC has been leading the Adaptation and Resilience Investors Collaborative (which its members refer to as ‘the Collaborative’) with other DFIs and multilateral development banks to accelerate private investment in adaptation finance.