To advance a just net-zero transition meaningfully, it is crucial to develop low-carbon energy supply in emerging markets and developing economies (EMDEs). However, an immense funding gap persists.
The UN-convened Net-Zero Asset Owner Alliance recognises multilateral development banks (MDBs) and Development Finance Institutions (DFIs) as key partners in accelerating climate action, due to their financial, technical, and knowledge capacity. However, as set up currently, they are not mobilising sufficient capital for EMDEs. Therefore, new MDB and DFI mandates are necessary to bring the currently undersupplied financing to the target markets.
Ahead of the Spring Meetings of the International Monetary Fund (IMF) and the World Bank Group, the Alliance Steering Group Chair – Günther Thallinger – has written to the G7 Finance Ministers, urging them to call for a reform of MDBs and DFIs. In the abridged letter below, the Alliance lists its three main requests.
“On behalf of the UN-convened Net-Zero Asset Owner Alliance, representing 85 institutional investors with USD 11tn assets under management, I urge you to call for systemic change of the governance and business models of the multilateral development banks (MDBs), particularly the World Bank, in the upcoming Spring Meetings of the International Monetary Fund (IMF) and the World Bank Group.
Accelerating the energy transition is crucial to address the climate crisis and energy security globally. Specifically, a massive surge in clean energy investments in emerging and developing economies is pivotal for the global transition to a net-zero economy. Current public investment plans remain insufficient to close the immense financing gap. Thus, to deploy investments at the required speed and scale, mobilising private capital is critical.
I invite you to consider the Alliance’s main requests:
- MDBs and DFIs should be incentivised through ambitious target-setting and clear key performance indicators (KPIs) to optimally leverage their balance sheets and make private capital mobilisation for the net-zero transition a core focus topic.
- The risk frameworks of MDBs and DFIs should be adjusted to generate greater additionality by increasing the type of financing currently undersupplied in the target markets (e.g. equity, including early-stage project development finance, and local currency financing). Equally, the provision of guarantees should be enhanced.
- MDBs and DFIs should be steered to focus on collective solutions, involving both domestic governments and the private sector, to accelerate capacity building and to create a robust pipeline of investable financial assets, which meet investors’ fiduciary requirements.
Further details on the above key requests can be found in the Alliance’s Call on Policymakers to support scaling Blended Finance and in the discussion paper on Scaling Blended Finance.”
About the UN-convened Net-Zero Asset Owner Alliance
The Net-Zero Asset Owner Alliance is a member-led initiative of 85 institutional investors, with over US$11 trillion in assets under management, committed to transitioning their investment portfolios to net-zero greenhouse gas emissions by 2050. The Alliance members were the first in financial industry to set intermediate targets (aligned with the Paris Agreement schedule) and they report on their progress annually. The Alliance is convened by UNEP FI and PRI and is supported by WWF and Global Optimism.