P4G Summit Explores Innovative Climate Financing Mechanisms
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“The solution lies with the entrepreneurs. For the future of the planet, the solutions are here,” said Alejandra Botero Barco at the 2023 P4G Colombia Summit High-Level Panel on Innovative Climate Finance. Botero, Manager at the Planning and Impact Development for CAF, the Latin American Development Bank, came together with other key stakeholders funding green solutions to discuss how to increase funding access for those who need it most.
Paola Garcia, Executive Director of ColCapital, kicked off the session emphasizing the need for the private sector to prioritize environmental social and governance (ESG) at the core of any investment. Without ESG principles incorporated and measured, entrepreneurs will not be able to get financing. Garcia also focused on the importance of the private sector and government working together. She shared the example from Colombia where the government established a legal framework that provided incentives for companies to transition to non-conventional renewable energy, thus bolstering the transition.
In his intervention, Morten Elkjaer, Senior Vice President of the Danish Investment Fund for Developing Countries (IFU) shared how IFU is looking to establish good relationships at the country level because local anchoring ensures that funding goes where it is needed the most. “We need to have a strong foundation, or we will never be able to ensure that funding is applied best. We need this local anchoring to contribute to climate goals and look at social inclusion.” Elkjaer also highlighted the need to ensure investments have a reasonable chance of becoming profitable because that’s the only way they will continue to implement and mobilize private sector over time.
Bringing in the local and regional government perspective, Cristina Argudo, Deputy Director for Latin America at C40 Cities, underscored the importance of ensuring innovative climate financing mechanisms must also be accessible to cities. She shared an example from Bogota where small subsidies to promote technological changes from diesel to more environmentally friendly trucks also included training for the drivers. These projects must be clear on the benefits and job creation to ensure an inclusive, just transition. Argudo notes that cities are very interested in leading with examples and they rely on different partnerships to do so.
Botero emphasized the need for urgent action throughout her remarks. Globally, only 15% of the SDGS are on track to be met, but none are on track in Latin America and the Caribbean. She noted this challenge is one of the reasons why CAF has made a commitment at an institutional level to fund 40% of green projects by 2026. With this ambitious commitment, Botero remarked that they can’t just impose this agenda, but have to do so hand-in-hand with affected communities. CAF wants to be seen as an ally for seeking out and de-risking projects, such as those on green energy or sustainable agriculture. Botero also urged attendees to reconsider how they measure project impact – rather than looking solely at dollars, measurements should also include how many places are protected or how many families are helped.
Moderated by Shuang Liu, Interim Global Director of the Finance Center at WRI, the panel included discussions of financing mechanisms, such as green bonds, guarantees and other measures that can help bridge the financing gap. To close the session, panelists were asked what advice they’d give the entrepreneurs in the audience. Botero encouraged them to look at both traditional and non-traditional sources of financing. With entrepreneurs as the pioneers in changing the paradigm, Argudo noted that even if conditions aren’t perfect, taking the first step is the best way to get the word out there. Garcia encouraged entrepreneurs to pursue solutions that can be scalable, while Elkjaer urged them to be transparent as well.
As Garcia put it, “We can’t keep living as two worlds apart. We need to see results and the only way to see results is working together as a team.”