● Al-Mashat reviews the recommendations of the "Sharm El-Sheikh Guidebook for Just Financing" to push the international community towards stimulating climate finance for emerging and developing economies and enhancing the participation of the private sector.
● Access to the required finance requires a greater partnership between the government and private sectors and the utilization of the resources presented by philanthropic organizations..
● Available climate finance represents only 14% of global financing needs and 90% of funds are directed to mitigation projects.
The Minister of International Cooperation, H.E. Dr. Rania A. Al-Mashat delivers the keynote speech at the panel discussion on "Mobilizing Blended Finance to Facilitate the Green Transition in Emerging Economies," as part of the preparations for the annual meetings of the AfDB, which start on May 23 in Sharm El-Sheikh, and will continue until May 26th, in the presence of Hassan Abdullah, Governor of the Central Bank of Egypt.
Their excellencies, Dr. Yasmine Fouad, Minister of Environment, Dr. Mahmoud Mohieldin, Executive Director of the International Monetary Fund, Dr. Mohamed Farid, Chairman of the Financial Regulatory Authority, Mr. Rami Aboul Naga, Deputy Governor of the Central Bank, and Mr. George Elombi, Vice President of the African Export-Import Bank, participated in the discussion session, moderated by Mr. Aliou Maïga, Regional Director of IFC.
Al-Mashat reviewed the most important provisions of the "Sharm El-Sheikh Guidebook for Just Financing", which was launched within the framework of Egypt's presidency of COP27 in light of the country’s efforts to stimulate climate action and strengthen international efforts to mobilize fair climate financing for developing countries and emerging economies. H.E. pointed out that the guidebook works on translating pledges into feasible projects while utilizing existing opportunities to maximize the utilization of available international funds and work to increase them and stimulate the participation of the private sector to support the climate action agenda.
Al-Mashat explained that the guidebook contributes to reducing the risks associated with investing in developing countries by bridging the gap in the availability of information, providing a clear concept and criteria for accessing climate action funding sources provided by financing agencies, and reviewing innovative financing models to open the way for private sector investment, it also sheds light on the various successful projects compatible with climate changes that can be replicated and developed in developing countries.
Al-Mashat stressed that it is not possible to access climate finance without following an approach based on partnerships between the relevant parties, and hence the guidebook was prepared in cooperation with about 100 multilateral and bilateral development partners, private sector institutions, international alliances for climate finance, and philanthropic organizations. H.E. added that the guidebook provides a list of capital providers, climate action finance entities, criteria for accessing financing sources, their degree of risk appetite, highlights their regional and sectoral focus, average individual transaction size required, and financing tools to increase the limited opportunities for developing countries to access climate funds, providing middle-income and low-income countries with greater clarity on the main sources of financing for climate action, and supporting decision-makers in identifying actions to address country-specific challenges and situations.
H.E. also stated that the guidebook presents the climate finance landscape in terms of future needs and comparing them with current flows. The reports issued by the Climate Policy Initiative indicate the total investments needed worldwide annually until 2030 to maintain an increase in global temperature at the level of 1.5 degrees, amounts to about $4.5 trillion worldwide, while the needs of developing countries amount to about $842 billion, noting that Africa alone amounts to $250 billion.
In this context, she said that the actual flows of climate finance between 2019-2020 amount to about $632 billion, representing 14% of the actual needs, including $80 billion for developing countries, representing 9% of their needs, and $29.5 billion for Africa, amounting to about 11.8% of their needs. She pointed out that the private sector has made available about $306 billion in climate finance, of which $14 billion has been directed to developing countries, and only $4 billion to Africa.
Al-Mashat added the great discrepancy between the distribution of these funds at the regional level in a way that does not match the actual needs and their vulnerability to climate change, as well as at the sectoral level, where 90% of the climate funds are directed to efforts to mitigate the repercussions of climate change, especially in the energy and transportation sector and only 7% is directed to the climate change adaptation sector, such as infrastructure, industry and land uses.
H.E. stressed that the major investments that the world needs in order to stimulate climate action make the pledges of $100 billion annually made by the international community are low compared to needs, and stressed the need to increase efforts to mobilize climate financing in order to stimulate climate action and the transition to a green economy.
Al-Mashat referred to the six chapters of the "Sharm El-Sheikh Guidebook for Just Financing" which are: The Climate Finance Landscape: Prospects and Opportunities, Creating an Enabling Environment for Climate Investment, Enhancing the Investability of Climate Projects, Catalyzing Private Capital for Climate Action, A Governance Structure for Just Climate Finance, and Mainstreaming Just Climate Finance in Developing Countries: A Focus on Africa.
Moreover, H.E. touched on the 12 principles of the guidebook which were developed based on 3 main strategic axes: state ownership, fair paths to climate finance, and governance structures, explaining that the principles set are a guiding framework to stimulate partnerships between all relevant parties, especially the public and private sectors to advance the process of transformation towards a sustainable green economy.
Al-Mashat stated that these principles are to support the right of developing countries to development and industrialization through fair paths within the framework of what was approved by the Paris climate agreement, to ensure consistency between the goals of global climate action and national development goals on both sides of mitigation and adaptation, and to support the efforts of governments to create an enabling environment by making financing available which would -in turn- raise technical and institutional competencies and capabilities in line with achieving climate goals, guaranteeing the right of all countries to achieve development under the principle of common but differentiated responsibility, including the concept of fair financing in the structure of international climate finance, ensuring the existence of an implementation mechanism, and guaranteeing the right to access climate finance, especially in countries and regions most in need.
This is in addition to not viewing climate finance as a substitute for development finance, but rather an addition to the available funds, supporting developing countries to provide the necessary financing to enhance their resilience to climate changes, establishing an effective governance system, establishing regulatory rules for green markets, and activating an efficient monitoring and evaluation system, ensuring harmonization between climate finance at the level of different sectors in light of balancing efforts to mitigate and adapt to the effects of climate change, strengthening transparency and accountability systems by setting unified standards for climate finance, and enhancing coordination between all parties involved in financing, which contributes to launching investment opportunities in developing countries.
Al-Mashat stressed that mobilizing the required climate financing will require achieving greater participation between the private and public sectors in order to open the way for the flow of trillions of dollars available to the private sector and non-profit organizations, and to enhance blended financing in which partnerships between the government, private sectors, development partners emerge and philanthropic organizations, are available to reduce risk rates and increase investments in climate projects.
The Minister also spoke about the importance of the role played by Nexus for Water, Food and Energy platform, the NWFE program in stimulating climate finance, pointing out that Egypt launched the platform to become a regional model and an international approach for countries that do not pollute the environment and that contribute in lower proportions to emissions, especially developing countries, emerging economies and countries of the African continent in order to enable them to attract blended financing and various financing mechanisms, to face the repercussions of climate change, as well as to enhance green transformation efforts and implement their nationally determined contribution.
H.E. stated that NWFE has already applied the principles of the "Sharm El-Sheikh Guidebook for Just Financing", in order to stimulate mechanisms for attracting climate finance and private sector investments, through partnerships with development partners, to implement the National Strategy for Climate Change 2050.