The story was corrected so that $21 billion of the total investment amount is attributed to World Bank Group and not IFC (paragraph 10)

By Simon Jessop

LONDON, (Reuters) – Climate change represents “the greatest business opportunity” in the global marketplace, however, more must be done to increase private sector investments in emerging markets, according to an executive at International Finance Corporation (IFC).

Speaking in an interview at the Reuters Impact conference, Managing Director Makhtar Diop said the current level of investment in emerging markets was just a fraction of the capital that could be being deployed from the world’s markets.

He said that the World Bank’s investment arm was supporting efforts to accelerate them by helping countries create their own climate change transition plans and improve regulation worldwide.

Even so, multilateral development banks (MDB), like the World Bank, had to be involved in helping create financial structures that would derisk private sector investments.

This “blended finance”, which can include an MDB providing the first loss-absorbing capital, to encourage risk-averse financiers and funds to get involved. It increases the money’s amount and enhances the environment.

Diop expressed confidence that “all activity related to Climate Change will be considered less risky in the future” and that the blended finance we bring with us will enable us to access more resources that we’ve been able in the past.

“NEED TO DO MORE”

Diop’s remarks come several months after Larry Fink (NYSE:) – the chief executive at the largest asset manager in the world – called for an overhaul of IFC and its peer institutions to encourage private sector capital to move.

Diop responded that MDBs “push as hard as possible” and that they were ready for the job, while acknowledging that they need to “do more”, listing several ongoing projects that could help.

These include moving climate change to the IFC’s core operations, and helping investment officers prepare projects that are “bankable”. Additionally, the IFC collaborated with peer MDBs on a method for evaluating projects. This will help to increase co-finance.

Diop reported that the World Bank Group had invested nearly $83 billion so far in climate change activity. Meanwhile, the World Bank Group made a new record of $21 billion for climate-related projects in 2020.

Climate change-related investment is one third of our resources. “We are trying to reach Paris-aligned 100% by 2025” he stated, refering to the Paris Agreement of 2015.

Diop stated that one of the greatest challenges in the coming round of international climate negotiations in Glasgow will be increasing the money available for projects related to adaptation to climate change.

Diop described the problem as “the hardest question that I face today”. This is because many of the emerging market countries are the ones that will need the greatest adaptations, such as in the case of desertification or coastal erosion.

“If there’s one thing I want us to work on in COP26 it is this: How to pool more resources together for adaptation.