Climate change is expected to increase risks to businesses, infrastructure, assets and economies. Understanding how to involve the private sector in responding to these risks – or encouraging them to take advantage of the new business opportunities that may arise from changing climate conditions – is crucial to catalyze greater investment in activities that increase countries, businesses, and communities’ resilience.
This working paper provides emerging insights from the experience of seven Development Finance Institutions (DFIs) in driving private sector investment in climate resilience, and from a workshop on strategies and business models that could help to scale up current efforts. It examines a subset of projects developed by five multilateral, one bilateral and one national development bank over 2011-2014, in both developed and developing countries. In particular, it looks at the tools and approaches designed by these DFIs to address pre-investment and investment stage barriers holding back private investment in measures that would enhance the resilience of infrastructure, water-intensive industries and agriculture. These are the sectors where DFIs have focused their private sector-oriented interventions. It aims to provide governments, their agencies and DFIs with an overview of the strategies employed so far and to identify opportunities to further scale up private investment in climate resilience.
The most comprehensive inventory of climate finance to-date, The Global Landscape of Climate Finance 2014, finds that global climate finance flows have fallen to USD 331 billion – far below even the most conservative estimates of investment needs.
Institutional investors, which together manage assets of over $70 trillion, often have investment objectives that are aligned with the investment profile of low-carbon infrastructure.
Indonesia’s desire to drive economic growth and reduce climate risk is reflected in the sweeping policy reforms it has introduced in recent years to meet targets announced in 2009 to reduce greenhouse gas emissions.