
By Dewi Dylander, Senior Director, IMCA, World Climate Foundation
According to the World Bank, emerging markets and developing countries need $2.8 trillion a year by 2030 to shift to low-carbon economies and mitigate the impact of climate change on their populations. Nonetheless, current global climate finance flows stand at only $1.3 trillion a year.
Public funding is scarce, so private sector investments are crucial to bridge the estimated USD 2.8 trillion annual financing gap by 2030. However, private investors such as pension funds often consider these markets too risky or too small to engage in.
This is where the Investment Mobilization Collaboration Alliance (IMCA) comes in – a joint initiative between Nordic countries and the United States aimed at scaling and accelerating private climate investments together with public finance in emerging markets and developing economies.
Launched last year at COP28, IMCA is a unique public-private partnership focused on catalyzing private sector investments into emerging markets and developing economies through blended finance.
In fact, this is a model the Danes have used with success for several years:
In 2018 the Danish DFI, IFU, together with six Danish pension funds, established the Danish SDG Investment Fund. Using blended finance to help asset owners to invest in what would otherwise be considered too risky markets is a prime example of the public private partnership IMCA aims to scale up and globalize. By leveraging blended finance instruments and public-private partnerships, IMCA seeks to de-risk investments and attract private capital from asset owners such as pension funds or family offices.
Since its launch last year, IMCA has already announced two collaborative financing initiatives within Blended Finance for Energy Transition and Adaptation.
In the Blended Finance for Energy Transition fund, IMCA helps mobilize $1.4 billion in climate mitigation investments to heavily coal-dependent emerging economies.
And the Adaptation financing window has attracted a competitive set of proposals from asset managers aiming to mobilize $500 million in private investment into food and water security, health, nature-based solutions, and infrastructure in developing and emerging economies.
IMCA expects to launch its third call for proposals at COP29 in Baku, with the recipients to be announced at COP30 in Brazil.
Do you want to hear more from Dewi?
Dewi Dylander will be one of the speakers at the new conference ‘Liv & Pension – Investering, Risiko og ESG‘ the 26th of November.