Leveraging private sector investments
One focus of the work of the International Climate Initiative (IKI) in 2024 was on financing the socio-ecological transformation - an overarching priority of the IKI strategy until 2030.
The estimated requirement for the global transition to a greenhouse gas-neutral world of four to eight trillion USD makes it clear, however, that an increase in private funding is paramount in addition to public funds.
Hence, one of IKI’s focuses in 2024 was again to improve the financial policy framework conditions in the partner countries with the aim of enabling higher investments in climate-compatible and biodiversity-friendly economic sectors. At the same time, the targeted deployment of IKI funds in all funding areas was leveraged to minimise the risk entailed in private fund investments. This also offers opportunities for German companies willing to invest in IKI partner countries.
The IKI promoted climate-resilient finance systems and the re-routing of financial flows by means of various projects. For example, the IKI extended the “Greening the Financial System” project at the end of 2024 and topped up financing by a further ten million euros. The project supports central banks and supervisory authorities to take climate-related risks into account to a greater extent and use the regulatory measures available in order to support a re-routing of overall financial flows.
An important tool for the mobilisation of private investments in climate and biodiversity measures is blended finance, which entails a combination of private and public funds. One good example of IKI funding is the “30 by 30 Zero” project, which was initiated in cooperation with the International Finance Corporation (IFC). This project involves the implementation of a blended finance measure to grant loans for environmentally friendly buildings in South Africa in May 2024. In addition, the IKI deposited a payment of 26 million euros in the IDB Invest “IKI-LAC Climate Private Sector Mobilisation Fund” at the end of 2024 in order to mobilise private investments in climate-neutral technologies in Latin America. A second tranche is planned for 2025.
Climate adaptation measures, in particular, are massively underfunded. Therefore, the IKI has been promoting the “Inclusive Green Finance in Asia-Pacific” project in selected countries in Southeast Asia and Oceania since 2024. This project works with local providers to develop green finance products and a funding mechanism to leverage private financing. The funding volume is around 20 million euros.
Furthermore, the IKI supported the “Natural Capital” topic of the European Bank for Reconstruction and Development’s multiple-donor fund “High Impact Partnership on Climate Action” (HIPCA) for the first time in 2024, thus developing bankable investment opportunities for biodiversity conservation. The IKI funding amounts to eight million euros.
Leveraging private investments also played a decisive role in the networking events with IKI implementing organisations at the meeting of the Subsidiary Bodies (SB) of the Framework Convention on Climate Change in Bonn and at the COP29.
Financing the socio-ecological transformation will remain an important component of IKI work in the future. Therefore, the IKI searched for forward-looking ideas in three key areas in its 2024 thematic call.
funding
was committed by the IKI in 2024 for projects that support the financing of the socio-ecological transformation.
Project overview 2024
IKI Annual Report 2024
This article is part of the IKI Annual Report 2024.
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