Blended Climate Finance Approach Crucial for Emerging Markets, Says SARB Deputy Governor

“Climate finance has made significant strides, doubling from 2018 to 2022, with the world reaching a milestone of $1 trillion in 2022,” said Tshazibana.

South African Reserve Bank (SARB) Deputy Governor, Fundi Tshazibana, has stressed the necessity for a blended approach to finance climate change mitigation and adaptation, particularly for emerging markets and developing economies. Speaking at the Group of Twenty (G20) side event on enhancing the global sustainable financial architecture in Cape Town on Tuesday, she underscored the critical role of climate finance in advancing climate transition efforts.

Tshazibana highlighted findings from the Climate Policy Initiative (CPI), which revealed that concessional finance currently accounts for only 11% of total climate finance for governments in emerging markets and developing countries.

The Climate Finance Gap and the Need for Private Sector Involvement

With fiscal constraints limiting governmental capacity to independently finance climate initiatives, she emphasized the essential role of private sector finance, which constitutes a third of the global economy. However, she noted that private investment requires a catalyst to mitigate risks and facilitate market development.

"Climate finance has made significant strides, doubling from 2018 to 2022, with the world reaching a milestone of $1 trillion in 2022," said Tshazibana. "However, CPI estimates indicate that around $7.4 trillion is needed annually this decade to stay on course with limiting global temperature increases to 1.5°C."

Sectoral Investment Gaps and Financial Strategies

The Deputy Governor pointed out that the most considerable climate investment gaps exist in the transport sector. However, substantial financing is also required in agriculture, forestry, industrial initiatives, and climate adaptation.

To bridge this gap, Tshazibana emphasized the importance of redirecting capital flows effectively. She referenced work done by the Network for Greening the Financial System and the World Bank, both of which advocate for a blended approach to climate finance that combines public and private investments.

The Role of Co-Financing and Partnerships

Co-financing was highlighted as a viable method to increase total project funding, providing a mix of financial instruments that can attract private investment. Tshazibana stressed that collaboration among multiple development actors could unlock private funding, accelerate global climate investment, and improve the efficiency of limited concessional funds.

"Partnerships leverage distinct and complementary institutional advantages and can take multiple forms, including co-financing, project preparation, capacity building, policy support, and risk mitigation," she noted.

The call for a blended approach comes at a crucial time as global leaders and financial institutions work towards sustainable economic and environmental strategies. Tshazibana's insights reaffirm the necessity of innovative financing mechanisms to ensure emerging markets can participate effectively in the global climate transition.