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World only invests 14% of what is needed to limit global warming, says study

Investments dedicated to the climate grew 10% in the 2019/2020 biennium, reaching US$ 632 billion in the world per year, according to the survey Global Landscape of Climate Finance 2021, prepared by the Climate Policy Initiative ( CPI).

Despite the advance of the annual average, the number is only 14% of the estimated amount of US$4.3 trillion per year of global investments needed to reach the Paris Agreement target of limiting warming to 1.5ºC by the end of the year. century.

“Given the scale of the challenge, it’s simply not enough. Achieving zero carbon by 2050 will require all public and private actors to urgently align their practices, investments and portfolios with 1.5°C targets,” said Barbara Buchner, CPI Global Director General.

The study identified that public investment continues to lead resources for climate finance, with 51% (US$ 321 billion) of annual contributions in the last biennium. Development banks are the ones that invest the most, representing 68% of the total capital allocated to the climate. The challenge of attracting private investors is still great despite the 13% increase in the period, reaching US$ 310 billion per year.

“Especially considering the recent tensions on public spending, private financing needs to significantly and quickly increase the volume of resources allocated to the climate. Although the numbers seem high, when analyzing the capital currently invested in the global economy in activities not aligned with the climate, such as energy, transport, construction and others, it is clear that there are resources available”, explains Buchner.

“The problem is that climate-friendly investment still represents a fraction of the funding that is flowing into high-carbon industries, and that’s especially true in emerging economies.”

Also according to the researcher, some of the main obstacles that impede climate financing in emerging markets are the investor’s lack of familiarity and the perception of risk. “I can also cite the lack of access to capital and the misalignment of existing financial instruments with available capital and local needs,” he adds.

As a result, the Global Climate Finance Innovation Laboratory was created in 2014 with the objective of “filling the climate investment gap, identifying the best ideas to unlock investment, transforming these ideas into viable financial instruments”, according to Buchner.

“So far, we’ve launched instruments that include funds, guarantees, bonds, insurance and credit products and more – all sharing a common vision for leveraging limited public or philanthropic capital to unlock private investment at scale. Brazil has been one of the Lab’s priorities, accounting for 10 of the 55 instruments developed so far”, he adds.

In developing economies, more than US$ 2.5 billion in resources have been mobilized for climate action in developing economies. In all, 10 instruments have been launched in Brazil since the creation of the Brazilian program in 2016.

In 2021, of the six global ideas chosen to be developed at the Lab, two were from Brazil: the Guarantee Fund for Biogas (GFB), the country’s first environmental guarantee fund, proposed by the Brazilian Biogas Association (ABiogás) and the Amazônia Sustainable Supply Chains Mechanism (AMSSC), credit fund for input suppliers with sustainable practices in the Amazon, proposed by Natura and Mauá Capital.

Together, the initiatives are estimated to initially unlock about $100 million in sustainable investments. The laboratory has more than 70 investors and public and private institutions that accelerate investment solutions to support sustainable development in emerging markets.

Reference: CNN Brasil

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