Cape Town: The South African Reserve Bank (SARB) Deputy Governor, Fundi Tshazibana, has underscored the necessity for a blended approach to finance climate change mitigation and adaptation in emerging markets and developing economies, during a Group of Twenty (G20) side event in Cape Town focused on enhancing the global sustainable financial architecture.
According to South African Government News Agency, Tshazibana highlighted the pivotal role of climate finance in facilitating climate transition efforts. Despite a significant increase in climate financing, with a milestone of $1 trillion reached in 2022, gaps remain, particularly in emerging markets and developing countries. She noted that concessional finance currently constitutes only about 11% of total climate finance in these regions.
Tshazibana pointed out the limited fiscal capacity of governments, emphasizing the necessity for private sector finance, which accounts for a third of the world’s economic activities, to help bridge the financing gap. However, private investment requires risk mitigation and market development facilitation to be effective.
From 2018 to 2022, climate financing has doubled, yet the CPI estimates indicate that $7.4 trillion is needed annually this decade to maintain global temperature rises within 1.5°C. Tshazibana called for strategic discussions to direct necessary capital flows, highlighting significant investment gaps particularly in the transport sector, while also pointing to the need for increased investment in agriculture, forestry, industrial initiatives, and adaptation efforts.
She stressed that work by organizations such as the Network for Greening the Financial System and the World Bank demonstrates a blended financing approach is essential for both climate change mitigation and adaptation. Co-financing, she explained, can enhance total project funding and mobilize private finance by providing a mix of financial instruments.
Tshazibana advocated for partnerships and collaboration among multiple development actors to unlock private funding, accelerate global climate investment, and optimize the use of limited concessional funds. These partnerships could involve co-financing, project preparation, capacity building, policy support, and risk mitigation, leveraging distinct institutional advantages to advance global climate goals.