Climate financing gap widens as global markets get jittery, ministers say
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Countries have to provide the right incentive and proportion of risk for public-private partnership in climate financing.
ST PHOTO: KUA CHEE SIONG
SINGAPORE - The combination of higher interest rates and a stronger United States dollar is leading to an exit of capital market funds from the developing world, said Senior Minister Tharman Shanmugaratnam, who is also chairman of the Monetary Authority of Singapore (MAS).
Because of these factors, he said, the world is not only failing to bridge the gap in climate finance but moving backwards each time there are jitters in global markets.
A "major pivot" is needed in the way nations operate public sector institutions in order to close the financing gap to achieve net-zero carbon emissions by 2050, he said at the Transition Finance Towards Net Zero: Scaling Blended Finance conference on Tuesday.
Mr Tharman said multilateral development banks (MDBs) are moving towards closing this financing gap, but "their shareholders need to mandate them".
These shareholders have to start thinking of the multilateral development banks not just as lenders but also as catalysts that could mobilise more private sector finance, he said.
Mr Tharman added that there is a need to rethink the role of MDBs and that of national development banks in order to mobilise capital of the scale required to help economies and corporates decarbonise.
He noted that there is no lack of capital, but countries have to provide the right incentive and proportion of risk for public-private partnership in climate financing.
Dr Rania Al-Mashat, Egypt's minister of international cooperation, said at the conference that public-private partnerships will help the world reach its net-zero goal quicker.
She said grants are a common feature of climate projects because they make a project bankable and reduce risks, in turn attracting the private sector to join.
She added that people need to think of a way philanthropists can easily participate in green projects and consequently tap more philanthropic money, resulting in a multiplier effect.
The conference in Singapore comes ahead of the United Nations climate conference, or COP27, which is to be held in Sharm El-Sheikh, Egypt in early November.
Correction note: The Monetary Authority of Singapore has clarified that Mr Tharman had made the point about exit of funds from capital markets and not just green funds.
