On the international stage, governments have committed to mobilise $100 billion per year by 2020 to support the low-carbon transition in developing countries. Though some estimates set the true cost of moving on to a global low carbon pathway in the trillions. This is clearly a massive challenge.
The Government is doing its bit, currently providing £2.9 billion via our International Climate Fund (ICF) through to 2014/15. But we need the private sector to work with us if we are to mobilise finance at scale.
This is why I established the Capital Markets Climate Initiative in 2010, a forum where Government and the Investor Community come together to drive innovation and new ideas for action to mobilise private climate finance at the scale needed to tackle climate change.
CMCI has already helped develop a range of innovative and transformational projects, which we are taking forward using public finance from the UK’s International Climate Fund. These include:
• Get Fit Uganda: With £20m UK Contribution, Get Fit will support the development and completion of small-scale on-grid renewable energy projects in Uganda to both avoid an energy shortfall and promote private sector investment by topping up the existing Feed-in-Tariff for renewables and providing capacity building support to the Ugandan Energy Regulatory Authority.
• CP3: The UK has invested £130m as an anchor investor into 2 commercially run private equity funds in partnership with the IFC (part of the World Bank Group) and Asian Development Bank. Investments will be made in to renewable energy, energy efficiency and clean technology projects in developing countries across the world. We announced at Davos, that one of the funds – the IFC Catalyst Fund – has reached first close, with investment of over USD 280 million.
• Green Africa Power: The UK will invest £98 m in GAP, to invest in renewable energy projects in Africa, by providing early stage capital and lines of credit to cover specific risks. It aims to demonstrate the long-term viability of renewable energy in Africa to attract private developers and investors and encourage future projects.
• India Solar: The UK will invest £50m to support solar energy projects in India by providing a REC market guarantee instrument. The instrument will provide certainty about the revenue stream that projects can expect to generate using RECs.
• We are also working to drive change in the deployment of climate finance through the Multi-lateral Development Banks, specifically encouraging greater use of instruments that enable private sector investment.
And just last month, I visited the UAE to speak at the World Future Energy Summit, where I extended the CMCI conversation to include global investors and sovereign wealth funds.
Together we identified concrete areas of opportunity for investment in developing economies and ideas on how to scale up finance for climate solutions with particular emphasis on advancing ideas on policy risk insurance as a means of tackling a major barrier to climate investment.
On top of this, I believe there is a real opportunity here for promoting British businesses as the commercial partner of choice. I was doing just that last Autumn when I led the largest ever Green Trade Mission to visit Africa, comprising 30 British businesses across the renewable energy supply chain, visiting Tanzania, Kenya and Ethiopia and opening the door to more trade and investment opportunities for the UK’s low carbon energy, goods and financial services industries.
It is this relationship between Government and the private sector that CMCI will continue to cultivate, to help both meet Government’s policy aims and increase business opportunities for private sector around the globe.
For more information please visit the International Climate Fund pages on the DECC website.