World Bank and Merrill Lynch among those working on ‘Climate Finance Lab’ to speed up $100bn fundraising goal
By Sophie Yeo
The US, UK and Germany will invite the private sector to propose ways to raise the billions needed to tackle climate change, in an initiative that UK minister Greg Barker will launch in New York today.
The Global Innovation Lab for Climate Finance â or âThe Labâ â has been designed to spur private sector investments into projects to help developing countries prepare for a warmer world, although it will stop short of offering any new fundraising targets.
Despite a pledge from rich countries in 2009 to provide poor nations with US$ 100billion a year from 2020, these funds have so far dribbled in slowly.
Greg Barker, the UK minister for energy and climate change, said: âThis exciting new global venture will allow the public and private sectors to work together to catalyse investment needed to help developing countries mitigate and adapt to the unavoidable impacts of climate change.â He will launch the project today at the Future of Energy SummitÂ 2014 in New York.
The group will meet for the first time in June, where it will consider various climate finance instruments proposed by the private sector, think tanks and others. It plans to select the best ideas by the beginning of next year, which will be implemented by relevant institutions.
The ability of governments to leverage private sector investment will be vital in enabling developed countries to deliver on their $100 billion promise, which is key to maintaining trust between developed and developing countries as they try to negotiate a global deal on climate change by 2015.
The Labâs task over the forthcoming year will be to identify, stress-test and promote new ways to generate investments in low carbon and climate resilience projects in developing countries.
Participants will focus on developing new options for raising finance, rather than coming up with specific fundraising targets, a spokesperson from the UKâs Department of Energy and Climate Change told RTCC.
She said: âItâs more about coming up with different financial approaches which developing countries can then take to create their own financial arrangements to use in raising capital and approaching banks.â
The UK, US and Germany are responsible for leading the project, alongside other donor countries including France, Japan, Denmark, the Netherlands and Norway. Senior government representatives from both developed and developing countries will work on the project.
Among the investors and development banks that will comprise the membership of the Lab are the World Bank, Bank of America and Merrill Lynch.
Bringing together public and private partners is essential in delivering the large amount of money required, with public funds expected to be used to leverage large amount of private capital.
According to Greg Barker, the UK has a âdirect national interestâ in supporting international action on climate change, as around two thirds of greenhouse gases are projected to come from the developing world by 2020.
So far, little has been delivered in the way of climate finance. Confidence remains low, with slow progress on the UNâs Green Climate Fund meaning there is no easy way to distribute the funds.
UK climate negotiator Pete Betts told RTCC last month that the UK was held back from making a donation by the Fundâs lack of preparedness, while UN climate chief Christiana Figueres warned that the âclock is tickingâ, as the Fund should be ready to receive money by the Secretary Generalâs landmark climate summit this September.
The new Climate Lab is a recognition that innovation is needed to scale up the finance in order to reach the $100 billion goal.
âThere has never been a more important time to convert climate finance ideas and knowledge into action,â said Elizabeth Littlefield, CEO of the Overseas Private Investment Corporation, the US development finance institution, who will serve on the Lab.
âI look forward to working in close collaboration with my public and private sector colleagues to ensure that we identify and adopt the most promising and high-impact solutions in climate finance.”