British International Investment (BII), the UK’s development finance institution and impact investor, will unveil new investments and partnerships at COP29 this week to mobilise private capital into climate finance.
Private investors collectively manage trillions of dollars in assets. BII has been working to encourage them to commit more capital to climate finance projects in emerging economies.
Private investors have historically been reluctant due to perceived risks such as local currency volatility, political instability, and regulatory challenges.
However, recent data from the International Finance Corporation (IFC) and European Investment Bank (EIB) shows that default rates in emerging markets are much lower than commonly believed. Additionally, development finance institutions (DFIs) like BII are uniquely positioned to partner with private investors and de-risk these types of investments.
The deals and initiatives BII plans to announce include a groundbreaking investment in India’s renewable power sector, made jointly with DFIs and a major private investor, a significant milestone in a landmark mobilisation initiative for Asia, created through collaboration between DFIs and private investors, and the launch of a blended finance facility in West Africa aimed at unlocking local currency financing from private investors for renewable projects like mini-grids.
“BII and other DFIs are innovating to generate opportunities for private institutions; to de-risk investments so that capital is allocated to where it is needed most,” said Leslie Maasdorp, Chief Executive Designate at BII. “Private investors, our doors are open. Speak to us. Explore the opportunities that DFIs can bring to your door. Interrogate the risks that we can help to mitigate.”
The announcements come as the UN Conference on Trade and Development estimates that developing economies need between $3.3 trillion and $4.5 trillion in annual investment to meet their Sustainable Development Goals. However, there is currently an annual financing gap of some $2.5 trillion.
Private capital will need to provide more than half of the up to $600 billion per year required to finance the green transition, with support from MDBs, DFIs, and other financial institutions.
