The Climate Investment Funds’ Clean Technology Fund has introduced a “Capital Market Mechanism”, which will become a new issuer of investment grade bonds.
The mechanism will become the first multilateral climate fund to access capital markets.
The Climate Investment Fund seeks to provide climate finance for developing countries to accelerate their shifts into low carbon technologies.
It was launched in 2008, and relies on donations from Australia, Canada, France, Germany, Japan, Sweden, the UK and the US.
CIF said the launch of the capital markets mechanism “could mobilise $500m of additional concessional capital every year for developing countries, leading to an estimated $50bn in total investment over 10 years”.
The bonds will be issued in London.
The move is just one of a slew of developments aimed at providing finance to aid developing countries move away from dirty power sources like coal.
The UK, UK, France, Germany and the EU announced on Tuesday they will partner with South Africa to help the country decarbonise its electricity production.
The arrangement makes $8.5bn available over the next three to five years to help it green its energy production sector. The money will come in the form of grants, concessional loans, investments and risk sharing instruments.
South Africa has the world’s most carbon intensive electricity production sector and produces 1.1% of the world’s greenhouse gas emissions, making it the 12th biggest carbon dioxide emitter in the world and the largest in Africa
The funds should accelerate South Africa’s move away from coal power into greener technologies, which should prevent 1-1.5 gigatonnes of emissions over the next 20 years.
COP 26 president Alok Sharma welcomed the development, calling it: “The sort of model we need to see more of in coming years” and adding that “supporting countries in the shift to clean energy” was vital.
The European Investment Bank will also be contributing €1bn to help South Africa decarbonise.
US Treasury secretary Janet Yellen said on Wednesday: “Expediting the transition away from coal — by both ending public international funding for new coal projects and providing innovative financing instruments to hasten the closure of existing coal-fired plants — is perhaps the most immediately impactful policy decision we can make from a climate perspective.”
E3G, a European climate change think tank, called the deal with South Africa “a vindication of the UK’s emphasis on coal as a priority for COP 26”.
The move comes alongside the Asian Development Bank’s launch of the Energy Transition Mechanism, which aims to speed up the retiring of coal power and the move to clean energy. As part of the pilot phase in Indonesia, the Philippines, and Vietnam, the energy transition mechanism is expected to raise $2.5bn-$3.5bn to retire several coal-fired power plants.
Outside of the public sector, the Rockefeller Foundation, alongside IKEA Foundation and Bezos Earth Fund, launched the Global Energy Alliance for People & Planet with an initial $10bn of funding from philanthropies and development banks to support energy access and the clean energy transition in the Global South, in strategic partnership with the UK-led Energy Transition Council.
Sharma welcomed the move, saying it would help with the effort to transition countries to clean energy.
