The Myth of Mobilising Private Finance for Climate Action and Pivoting to Scale

Acting on climate change and the achievement of the Sustainable Development Goals (SDGs) requires significant investment and innovation and the right scale of finance. The world needs a new roadmap on climate finance that can mobilise the US$1 trillion per year in external finance that will be needed by 2030 in developing countries (Songwe, Stern, and Bhattacharya 2022). There is great potential and need to increase private sector investment and finance for climate. Momentum is growing among mainstream investors, driven in part by the commitment to ‘net zero’. However, cross-sectional risks impede the mobilisation of private climate finance at scale. This Policy Brief proposes a framework of solutions for the G20 to make blended finance work for the SDGs and to undertake actions in three areas: (i) enabling environments; (ii) instruments; and (iii) institutions. In doing so, the G20 can take the lead in supporting enhanced and concerted action between the public sector, private investors, Multilateral Development Banks (MDBs), and International Financial Institutions (IFIs) from both developed and developing countries to provide solutions for systemic and transaction-level constraints.