Mobilizing Private Climate Financing in Emerging Market and Developing Economies

Staff Climate Notes, July 27, 2022

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Canonical URL: Mobilizing Private Climate Financing in Emerging Market and Developing Economies

Authors: Ananthakrishnan Prasad, Elena Loukoianova, Alan Xiaochen Feng, William Oman
Published: July 27, 2022
Series: Staff Climate Notes
DOI: https://doi.org/10.5089/9798400216428.066

Global investment to achieve the Paris Agreement’s temperature and adaptation goals requires immediate actions—first and foremost—on climate policies.
Policies should be accompanied by commensurate financing flows to close the large financing gap globally, and in emerging market and developing economies (EMDEs) in particular.
The note discusses potential ways to mobilize domestic and foreign private sector capital in climate finance, complementing climate-related policies by mitigating relevant risks and constraints through public-private partnerships involving multilateral, regional, and national development banks.
The note also overviews the role the IMF can play in the process.

Mobilizing private sector capital is essential to close the climate investment gap for both mitigation (temperature goals) and adaptation.
Public-private partnerships, including multilateral, regional, and national development banks, can mitigate risks and constraints that deter private investment.
Both domestic and foreign private sector capital are potential sources for climate finance in EMDEs.
Climate policies are the foundational first step; financing must follow and be commensurate with policy ambition.

Use public instruments and partnerships to mitigate investment risks that impede private capital deployment in climate projects.
Leverage multilateral, regional, and national development banks to structure public-private partnerships that attract private finance.
Pair strong climate policies with targeted financing arrangements to ensure policy credibility translates into investment flows.

The IMF can support the process of mobilizing private climate financing, including through policy advice and engagement with member countries to align fiscal and financial frameworks with climate objectives.
The note provides an overview of avenues through which the IMF can contribute to mobilizing private climate capital in EMDEs.

Authors: Ananthakrishnan Prasad, Elena Loukoianova, Alan Xiaochen Feng, William Oman
Date: July 27, 2022
Series: Staff Climate Note No 2022/007
Issue: 007
Volume: 2022
Pages: 41
DOI: https://doi.org/10.5089/9798400216428.066
ISBN: 9798400216428
ISSN: 2789-0600
Subject keywords: Climate change, Climate finance, Economic sectors, Environment, Financial crises, Non-renewable resources, Public sector
Additional keywords: adaptation investment, adaptation investment project, Bloomberg finance L.P., capital flows, climate investment, climate investment decision, economic gain, equity capital, financial policy, Global, IMF analysis, IMF staff Climate note, investment project, Non-renewable resources, private sector capital, private sector investor, public finance, Public sector, sustainable development, sustainable finance, venture capital

IMF Staff Climate Note No 2022/007 — "Mobilizing Private Climate Financing in Emerging Market and Developing Economies", July 27, 2022.