Philanthropy, capital markets and development institutions are working more closely together to reduce the risks of climate investment. Some projects that could help cut emissions are still perceived as risky by the private sector. Guarantees and are being used to attract investors and make those investments more accessible.
The solar industry offers an example of what can work: simplifying procedures has helped attract substantial investment. Platforms are being developed to give investors a to assess, making it easier to replicate an investment approach from one country to another. That predictability matters in the energy transition, where contracts often last 20 years or more. Investors need confidence that the terms of those agreements will hold.
Financing instruments are only part of the picture. Policies also need to progressively change the relative prices of fossil-fuel energy and energy generated without fossil fuels. Governments can do more to reduce subsidies for , particularly in the electricity sector. At the same time, utilities need to be well managed, and regulators need to set prices and conditions that allow investors to make long-term decisions.
Another challenge is finding the right way to finance new technologies. The transition will require rapid adoption, with among the technologies needed to accelerate progress towards net zero. The question is how to provide financing suited to those technologies and the pace at which they need to be adopted.
have together financed $150 billion in climate-related activities. IFC financed more than $10 billion in such activities last year. The financing effort is already under way, accompanied by innovation in both funding and guarantees.