Climate finance has become a focal point at the ongoing COP28 in Dubai, United Arab Emirates (UAE). The scale of the challenge is evident. According to a report, a staggering $2.4 trillion is required annually for climate mitigation efforts in developing countries alone. This urgency underscores the critical need to accelerate climate finance. Taking place until December 12, COP28 serves as a crucial platform to address this pressing issue. Demonstrating a promising development, billions of investments have already been pledged. Here are the top COP28 key takeaways regarding climate finance.
UAE commits $30 billion via ALTÉRRA
The UAE, the conference’s host country, has made a giant leap in climate finance with a $30 billion commitment to ALTÉRRA, which touts itself as a “catalytic climate investment fund.” Designed to reform the global climate finance system, ALTÉRRA focuses on enhancing funding access for the Global South. As the world’s largest private investment vehicle for climate action, it aims to mobilize $250 billion globally by 2030.
In particular, its $25 billion component, ALTÉRRA ACCELERATION, aims to direct institutional capital toward high-impact climate investments. Meanwhile, ALTÉRRA TRANSFORMATION, a $5 billion component, mitigates risks to incentivize investments in the Global South. This transformative initiative addresses challenges limiting climate investment while creating opportunities for Least Developed Countries (LDCs) and Small Island Developing States (SIDS).
According to COP28 President Dr. Sultan Al Jaber, the launch of ALTÉRRA is a “defining moment.”
“ALTÉRRA provides a transformational solution for attracting private capital. Its scale and structure will create a multiplier effect in climate-focused investment, making it a vehicle like no other,” Dr. Al Jaber, who will chair its board, added.
ALTÉRRA has BlackRock, Brookfield and TPG as inaugural launch partners.
Read: COP28: ADGM home to landmark $250 billion climate action fund
Green Climate Fund, Allied Climate Partners and Allianz Global Investors mobilize $5 billion
COP28 saw the inclusion of the Business & Philanthropy Climate Forum in its program. It marks the first time that the conference has provided a dedicated platform for the private sector and philanthropy.
In this pivotal event, which convened over 1,300 global leaders, three established organizations have pledged to mobilize $5 billion through innovative blended finance structures. One of the most important COP28 key takeaways, this strategic collaboration aims to unlock at least $20 billion, uniting philanthropies, development finance institutions and public and private sectors.
“Business and philanthropy hold great promise to accelerate the achievement of our climate and nature goals,” stated Badr Jafar. He sits as the special representative for Business and Philanthropy at COP28.
Meanwhile, commenting on the importance of the forum, he remarked, “The Business & Philanthropy Climate Forum provides this much-needed inclusive platform for enabling concerted action, breaking down silos across stakeholders and sectors, and connecting private sector leaders from all regions of the world around game-changing outcomes underpinned by the COP28 Action Agenda.”
$750 million Climate Solutions Investment Platform announced
The landmark forum also witnessed Investcorp announce the Climate Solutions Investment Platform. This platform aims to infuse $750 million of growth capital into companies offering innovative products, services and technologies for a sustainable future.
According to Investcorp Co-CEO Rishi Kapoor, “Our focus on scaling commercially proven climate solutions provides the most attractive risk-return and delivers the highest impact by helping corporates and consumers achieve decarbonization targets within accelerated timeframes.”
Investcorp is an alternative investment management company. The initiative is in collaboration with the “Innovate for Climate Tech” coalition. The coalition, launched in November 2023, unites key industry players, including Masdar City, Tencent and Catalyst. Their collective goal is to drive decarbonization and combat the effects of climate change. Several more entities have since joined the group namely Siemens, Asian Infrastructure Investment Bank and Belt and Road Environmental Technology Exchange and Transfer Center among others.
UAE gives low-income, vulnerable countries a $200 million boost
During the World Climate Action Summit (WCAS) at COP28, the UAE also announced that it will inject $200 million worth of funding for climate resilience. This reflects the country’s dedication to supporting development in low-income countries.
The pledged amount will be delivered as Special Drawing Rights (SDRs) to the International Monetary Fund (IMF)’s Resilience and Sustainability Trust (RST).
SDRs are a stable asset tied to five major currencies: the US Dollar, Euro, Chinese Renminbi, Japanese Yen and British Pound Sterling. IMF members can exchange SDRs for any widely accepted currency as required. About 75 percent of the countries that are members of the IMF qualify for RST financing, encompassing low-income nations, middle-income countries, and SIDS.
“The Ministry of Finance in the UAE prioritizes identifying climate financing gaps, assessing the impact of climate change mitigation policies on capital flows, and recognizing the macroeconomic risks resulting from climate change. We work closely with our partners from international financial organizations, such as the IMF, to enhance multilateral coordination in sustainable finance action,” enthused His Excellency Mohamed Hadi Al Hussaini. He is the minister of state for Financial Affairs.
Earlier in October, the government had committed $200 million to IMF’s Poverty Reduction and Growth Trust Facility.
CO28 key takeaways from Finance Day
December 4 was COP28’s Finance Day. In this event, the Green Climate Fund secured an additional $3.5 billion from five nations, including Estonia, Italy, Portugal, Switzerland and the US. This significant boost brings the total pledged amount for the next four years to a historic $12.8 billion.
On the same day, multilateral development banks intensified their commitment to advancing. climate finance. In particular, the Inter-American Development Bank shared its plan to triple climate lending, reaching $150 billion over the coming decade. Simultaneously, the World Bank pledged to elevate its climate finance target to 45 percent by 2025, shelling out an extra $9 billion every year.
On top of this, the Islamic Development Bank allocated $1 billion to aid adaptation in conflict-affected nations, while the African Development Bank initiated a $175 million facility for green infrastructure in Africa.
During Finance Day, several international financial institutions also introduced climate-resilient debt clauses to support vulnerable countries. The initiatives demonstrate a collective effort to address climate challenges and mobilize funds for sustainable projects. Furthermore, it signifies a noteworthy advancement in restructuring the global climate finance framework, which aligns with the core vision of the COP28 UAE Declaration on a Global Climate Finance Framework. The framework was officially introduced at the WCAS.
Final thoughts
Climate finance takes center stage at the ongoing COP28. Since the conference’s commencement, various financial innovations and collaborative efforts have already unfolded. All these showcase a heightened commitment to achieving global climate goals and lending a hand, especially to vulnerable countries. And with these COP28 key takeaways mentioned, the future of climate finance looks bright, green and promising.
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