The South African Reserve Bank (SARB) Deputy Governor, Fundi Tshazibana, has emphasised that emerging markets and developing economies need a blended approach to finance both climate change mitigation and adaptation.
Moderating the Group of Twenty (G20) side event on enhancing the global sustainable financial architecture in Cape Town on Tuesday, Tshazibana highlighted the crucial role of climate finance in driving climate transition efforts.
“The Climate Policy Initiative (CPI) global landscape of climate finance has found that concessional finance at present is only at about 11% of total climate finance for the bulk of our governments, especially in emerging markets and developing countries.
“We know that the fiscal space for governments is quite tight, which means governments cannot go this journey alone. In this regard, private sector finance, which compromises of a third of the world’s economic activities will be vital to close the financing gap. However, private investment will require a catalyst to mitigate certain risks and to facilitate market development,” she said.
Although climate financing has doubled from 2018 to 2022, the financing gap remains large.
“In 2022, we reached the $1trillion milestone in climate finance but analysis by the CPI shows that although climate finance has doubled since 2018 having grown from $674 billion US dollars to about $1.4 trillion in 2022, there are still significant gaps in terms of what needs to be funded in this space,” the Deputy Governor said.
According to the CPI estimates, about $7.4 trillion is needed every year this decade to keep the world on track and limit global temperature rises by 1.5°C.
“To reach these levels we need to have conversations around how to direct capital flows that are needed in this regard. The largest climate investment gaps in absolute terms have been observed in the transport sector but we know that we need increased investment in agriculture, forestry and other land use as well industrial initiatives as well. Financing needs are also significant in the area of adaption,” she said.
Tshazibana explained that the work done by various organisations including the Network for Greening, the Financial System and the World Bank shows that a blended approach to financing for both climate change mitigation and adaptation is required.
She said co-financing can increase total project funding and provide a mix of financial instruments to mobilise private finance.
“Partnerships and collaboration involving multiple development actors can unlock private funding and accelerate global climate investment and increase efficiency of the use of scarce concessional funds,” the Deputy Governor said.
She said these partnerships leverage distinct and complementary institutional advantages and could take many forms, such as co-financing, project preparation, capacity building, policy support and risk mitigation. – SAnews.gov.za
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