Guest: Mafalda Duarte | CEO | Climate Investment Funds
Category: 💸 Investing | Developing Countries
Podcast’s Essential Bites:
[0:03] JB: "Developing countries face the dual challenge of meeting rapidly growing energy use, while also scaling clean energy to avoid dramatic increases in carbon emissions. But financing all those clean energy projects is not easy. Estimates are that somewhere in the range of $1 to $2 trillion per year for the next 30 years needs to be invested in clean energy in emerging and developing economies on a pathway to net zero emissions by 2050."
[6:00] MD: "Climate Investment Funds [...] is an interesting initiative by the G8 [...] [founded] in 2008, [...] [which] was the time of financial crisis [...] [and] climate negotiations [...] weren't going so well. So G8 decided to set up these funds and put public capital on that could take on risks, reduce the costs of technologies, of investments, cost of capital, and basically [...] provide the incentives to governments and to the private sector to actually make different investment decisions in developing countries."
[11:07] MD: "[There are] different barriers in different countries. Right now [...] we have the added complexities of [...] the doubling of the number of [...] developing countries in [...] high risk of debt distress or already at debt distress. [...] After the first 100 days of the war in Ukraine, [...] we saw 142 developing countries that had their currencies [...] depreciated by an average of 2.8% against the dollar. [...] This is why we are also seeing a lot more risk averseness from the private sector and private investors to go into these markets and invest in clean energy. [...] [However,] from a broader strategic perspective, we think there are areas that are not receiving sufficient attention."
[21:09] MD: "[Globally] we have [...] [an] 50% increase in energy prices from last year [and] 21% increase in food prices from last year. [...] [This] hits developing countries disproportionately, because their energy bills are much higher as a percentage of GDP than developed countries. [...] Fiscally, the countries are in a really difficult situation, [which] makes the climate discussions and certainly COP27 extremely challenging. [...] The narrative over the last few years has been one of [...] everybody is moving away from fossil fuels, including them. And now they are seeing because of the war in Ukraine, that developed countries are actually coming back to fossil fuels."
[27:56] MD: "60% of [the coal fleet] in developing countries is less than 20 years old. So there's still 20 years or more of economic life in these assets. And now we have [...] to have the discussion [of] [...] if we want to have these assets retired earlier, how much do we have to pay?"
[32:31] MD: "We need to help countries decommission, repurpose [their] coal fired power plants. We need to help enable massive buildup of renewable energy capacity, and we need to deal with the transmission infrastructure, and all of the other investments that are necessary to enable the integration and the management of this intermittent renewable energy capacity into these power systems. So these are core elements [...] [that] we will be investing [in] and financing. [...] We are working with governments to see which work is necessary at the policy and the regulatory level, but [also] [...] in terms of institutional capacity [...] to manage such a transition."
[48:34] MD: "We just launched [...] two new investment areas [called] coal transition and renewable energy integration. We launched one new area in June [called] nature-based solutions. We will launch an industrial decarbonisation investment program at the [up]coming COP and we intend to launch also an investment program on climate smart cities. [...] We move away from this polarization of the climate agenda on mitigation and adaptation. We are saying very clearly that what we need is deliberation in investments in maximizing both outcomes, mitigation and resilience outcomes."
Article: "It’s time to make clean energy investment in emerging and developing economies a top global priority" (IEA, 2021)