I’ve recently attended COP28 in Dubai, having loved every minute of my time there. While I’ve paid close attention to past COPs, this was the first one I’ve attended in person. Amid the whirlwind of activity in the full glare of the global media, it was fantastic to visit the various pavilions, meet the hugely diverse attendees at the event, and discuss a vast range of issues related to the fight against climate change.
Depending who you talk to, the agreement struck at the end of COP28 either marked a historic step forward by calling specifically for countries to transition away from fossil fuels – or represented a missed opportunity to lock in more immediate cuts in emissions. But by definition, the journey to net zero is a complex, multi-stakeholders mission that will take time. And my own conversations at the event gave me some grounds for optimism that we’re on the right track.
So, as an infrastructure professional attending my first COP, what takeaways came across most strongly for me? I’d like to pick out three in particular. Each of them helps to map out how the infrastructure sector can support the move to a lower-carbon and more sustainable world.
Blended finance: progressing from fine words to concrete action
My first takeway was the growing momentum behind “blended finance” – a structuring approach that can help mobilise private capital for sustainable infrastructure projects, by enabling organisations with different objectives to invest alongside each other. We recently published a thought leadership paper exploring the potential for blended finance to play a key role in closing the infrastructure investment gap in emerging markets. Blended financing had been in the tool box for financing infrastructure projects in emerging markets for decades. My experience at COP28 showed this is now starting to happen in climate financing.
So, what’s changed? While blended finance has been widely discussed at previous COPs, it’s mainly been at a conceptual level. But this time I saw a growing recognition that many different pots of capital need to come together to finance the energy transition and sustainable infrastructure projects in emerging markets. As a result, the emphasis shifted away from theoretical talk about blended finance, and towards concrete commitment and action.
Some examples? Two announcements at Singapore’s COP28 Pavilion illustrate the trend. One was the announcement by Convergence – the global network for blended finance – of the first three recipients for the Asia Climate Solutions Design Grant, supporting nature-based solutions and clean energy transition projects across South and Southeast Asia. Another was the launch of the Financing Asia’s Transition Partnership (FAST-P), a platform that aims to raise US$5 billion for climate action in Asia. The word at COP28 was that there’s much more action around blended finance to come.
A rising focus on climate adaptation
My second takeaway from COP28 was a greater focus on grid infrastructure, storage, energy efficiencies and adaptation. At previous COPs there’s been a lot of talk about delivering projects designed to be sustainable from the ground up, in areas like renewable energy. But this time there was much more discussion among infrastructure players and potential funders about how investments in grid infrastructure and storage projects (which are important to reduce curtailments), in energy efficiencies to cut back use of energy and adapting existing or in new-build infrastructure may help to alleviate climate risks for vulnerable communities. Adaption projects ranging from better flood management and more are set to become increasingly prominent in the drive to make infrastructure more climate-resilient
Greater involvement from multilaterals
My third takeaway? Rising involvement and engagement with the sustainable infrastructure agenda from Multilateral Development Banks (MDBs) and Development Finance Institutions (DFIs). In the past, multilaterals – including the likes of The World Bank, Asian Development Bank and so on – have always been involved in infrastructure financing and capacity building in emerging markets through their support in areas such as procurement of infrastructure.
But at COP28 I saw the multilaterals starting to get much more involved in the climate aspects of infrastructure. The underlying change? Rather than approaching infrastructure development and climate action as separate issues, stakeholders are now thinking and acting at the nexus where the two come together – blending their traditional role in supporting infrastructure deployment with a focus on attracting climate financing and helping governments plan out their pathways to net zero. In my view, this is a really positive development that bodes well for the future.
Reasons to be hopeful
A closing thought? If I’ve learnt anything in my 20 years working in infrastructure, it’s that it takes time to get everyone on the same page. Given the multiplicity of stakeholders and interests involved, nothing ever happens overnight.
So, while I understand the frustration of those who would have liked to see faster progress at COP28 at a headline level, the reality on the ground was much more positive, with many encouraging signs for the future. That’s why I remain optimistic. And my three takeaways from the event make me even more so.
The new era of sustainable infrastructure is coming. It will take a little longer to arrive than some people hope – but it’ll be worth the wait.
A summary some interesting announcements and initiatives in blended financing (non-exhaustive of course!):
Asia Climate Solutions Design Grant
Announced at the Singapore Pavilion, NBSV Worldwide, Lestari Capital and Powertrust will receive proof of concept and feasibility study grants to address climate action across South and Southeast Asia with a focus on nature-based solutions (NbS) and clean energy transition.
The Asia Climate Solutions (ACS) Design Grant’s anchor donors are the Monetary Authority of Singapore, the Department of Foreign Affairs and Trade Australia, Olayan Group, and UBS Optimus Foundation.
Financing Asia’s Transition Partnership (FAST-P)
A new Asia-focused blended finance initiative to mobilise up to US$5 billion (S$6.67 billion) for green and transition projects announced by the SG Government. Singapore will contribute “concessional capital” as part of the funding required in the blended finance structure.
As part of this initiative, a new green investments partnership with Allied Climate Partners; the World Bank’s IFC and Temasek will be a key pillar in FAST-P. Another key FAST-P partnership announced was signed between MAS, the Asian Development Bank (ADB) and Global Energy Alliance for People and Planet (GEAPP) to accelerate energy transition at scale in Asia.
Green Climate Fund (GCF) to invest $150 million in GAIA
Green Climate Fund (GCF) to invest $150 million in GAIA. GAIA is a blended finance platform led by MUFG and FinDev Canada. The $1.48 billion platform offers long-term loans for climate change adaptation and mitigation in up to 25 developing countries, making funding accessible through sources previously unattainable to participating countries.
One Acre Fund Re
One Acre Fund has launched a new reinsurance fund, called One Acre Fund Re. It is set up to provide a critical financial safety net for smallholder farmers. The new fund is in partnership with the International Finance Corporation, US International Development Finance Corporation, and the African Risk Capacity.
Allied Climate Partners
Allied Climate Partners aims to combines philanthropy, development finance institutions and the private sector to fill critical financing gap in the early stages of climate-related projects is in emerging economies. Three Cairns Group and the Bezos Earth Fund are among the charitable donors that aim to seed the ACP with $235 million, with a further $590 million expected to come from investors including the World Bank's International Finance Corporation. ACP aims to raise $11 billion in debt and equity finance for climate-related projects in emerging market.
Alterra
The United Arab Emirates to set up new climate fund of $30 billion aiming to steer institutional capital towards climate investment. This include a $5 billion carveout for the Altérra Transformation Fund that will provide risk-mitigation capital, such as first-loss reserves, to incentivize private climate investment in least-developed countries and small island states. The remaining $25 billion is earmarked for the Alterra Acceleration Fund, of which $6.5 billion has been committed to climate funds managed by BlackRock, Brookfield Asset Management and TPG.
Eversource received catalytic concessional capital
Eversource receives catalytic concessional capital (quantum unannounced) from the US Department of State and the United States Agency for International Development (USAID) through its programme Blended Finance for Energy Transition (BFET) and the Investment Fund for Developing Countries (IFU) under the Danish Development Finance Institution (DFI).
