NDF - Financing for climate change and development projects

Global climate investment exceeds half-trillion USD dollar mark

Photo: Marjo Koivumäki
Barbara Buchner, Executive Director of Climate Policy Initiative
Illustration: Sanna Turunen

But major transformational shift still needed says CPI’s Barbara Buchner

On the occasion of NDF’s 30-year anniversary in development aid and 10 years in climate financing, Executive Director of Climate Policy Initiative (CPI), Barbara Buchner, led a panel on the future of climate financing. In framing the subject, Buchner gave the audience of 100 NDF stakeholders a sobering view of the current climate financing landscape.

In 2018, the five most expensive climate related disasters including hurricane Michael and the California wildfires clocked up damages of around 67.5 billion US dollars. “And the situation’s only going to get worse,” Buchner warned.

Record high financing driven by low-carbon energy and transport
A CPI study just released shows global climate finance reaching a record high of USD 612 billion in 2017, driven by investment into renewable energy and lower-carbon transport, combined with greater public commitment to land use and energy efficiency. The following year, 2018, brought an 11% drop to USD 546 billion.

While Buchner, who has been named one of the 20 most influential women in climate finance, sees surpassing the half-trillion-dollar investment mark as a positive sign, she stressed in her remarks that leaders should be focused on total economic transformation.
“This amount is simply not enough,” Buchner asserts, “especially as investments in polluting industries continue to effectively cancel out these efforts. There still needs to be a major shift in how we invest if we want to avoid catastrophic climate change.

CPI putting knowledge to good use
CPI as an organisation works with multi-stakeholder groups like governments, development finance institutions, banks and fund managers to optimise climate change investment opportunities.

“By working together with players who really understand the market, we can put their knowledge to good use, identifying really promising climate investment areas and working to really keep money flowing into those areas,” Buchner explains. “And this is with the ultimate goal of unlocking private investment at scale for climate change and development.”

NDF a strategic innovation partner  
Buchner sees smaller players like the NDF going a long way to enhance the CPI mission. By investing smaller amounts into the early risky phase of a climate project, NDF makes way for larger-scale, later stage investment from more risk-averse institutional investors.

“Investing at the early stage is in line with the strategy and mandate given to us by our Nordic government funders,” says NDF’s Deputy Managing Director, Leena Klossner. “And working at this intersection among different areas of risk is where innovation really happens.”

Of course, not everything needs to be innovative, in the sense of being new. “Innovation could be a new way of addressing climate risk or of putting an existing technology to work more efficiently,” says Buchner. “Most importantly, it should be bringing opportunities to fast-track private sector involvement.”

Every year, CPI's Global Innovation Lab for Climate Finance crowd sources for ideas with the ultimate goal of unlocking solutions that can be actionable, catalytic and commercially viable in ways that will bring in private sector and ultimately phase out the need for public sector money. They’ve just announced that the 41 instruments developed by the Lab over the last five years have mobilized over USD 2 billion in investment. And there is still time to get involved this year, with their call for ideas for the 2020 cycle closing on December 20.

Now that’s transformational!

Written by Laurel Colless

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