Public markets are key to mobilising climate finance in developing countries
18 November, London/Baku. Public markets can play a crucial role in mobilising private investment at the scale needed to achieve the global climate transition and to deliver the Sustainable Development Goals (SDGs) in emerging markets and developing economies (EMDEs).
This potential was highlighted at the ‘Public Markets for Public Good’ event hosted by the Foreign, Commonwealth and Development Office’s (FCDO) MOBILIST programme at COP29. Panellists from the FCDO, British International Investment, Aviva, and the Asian Development Bank came together to discuss how to drive more investment in climate action in EMDEs from institutional investors, including through public markets.
An estimated additional $4 trillion is required annually to deliver the SDGs by 2030. Meanwhile, approximately $500 billion in international private finance, including from institutional investors, will be needed annually to help close the climate and development financing gap. Identifying innovative products that can support the climate transition and offer strong development outcomes is key to achieving the scale of finance required.
Public markets present an underutilised but potentially major opportunity to help drive institutional investment in EMDEs. Panellists at the event reflected on what can be done to encourage institutional investors to direct more capital to these markets, highlighting that risk perceptions, misinformation and limited data continue to impede investment flows – and that public markets have the potential to drive this shift.
The panel emphasised the opportunity for greater collaboration between governments, development finance actors, and financial sector stakeholders to ensure that capital is deployed as effectively as possible and that the scope to deploy innovative instruments can generate investment returns at scale. They also discussed opportunities for MDBs and DFIs to utilise public markets to exit investments or transfer risk from their balance sheets to free up capital for lending and investment.
As the UK’s flagship public markets programme, it was noted that MOBILIST is a powerful example of how capital deployed through public markets can be used to change the financing of businesses that will narrow the climate and development financing gap. MOBILIST provides equity investment and technical assistance to support the listings of developing country assets on global stock exchanges, mobilising both domestic and international institutional investors.
MOBILIST demonstrates that public markets can deliver climate finance by backing the world’s first dedicated hard currency green guarantee platform, supporting the listing of a clean energy firm on the Philippine Stock Exchange, backing a dedicated climate adaption and resilience fund for Africa, and providing equity to an infrastructure asset-backed securitisation on the Singapore Stock Exchange.
The programme represents the fourth element of the UK’s development finance toolkit, alongside the UK DFI BII (British International Investment), the multilateral PIDG (Private Infrastructure Development Group), and the UK’s Africa DFI FSD Africa (Financial Services Deepening Africa). It complements these and other private market instruments as the UK’s only public market-focused instrument.