JOHANNESBURG, (Reuters) – The United Nations launched Wednesday a new financing mechanism that will save African governments $11 million in future borrowing costs. It also promotes greener investment and sustainable development.

The U.N. Economic Commission for Africa, (UNECA), launched the Liquidity and Sustainability Facility at COP26. This global climate conference is taking place in Glasgow, Scotland.

Portfolios that contain African government bonds can be approached by international investors for short-term loans. This is known as repos. They will use the bonds to secure the loan. It also increases liquidity, which means investors are able to quickly turn the bonds into cash.

These bonds will be more risky than before and thus attractive to a greater number of investors. This would allow African governments to benefit from increased demand for and liquidity in their bonds as well as lower financing costs.

According to the LSF, it can potentially help African countries save up to $11 trillion in their borrowing costs over five years.

Mohamed Maait, Egypt’s Finance Minister said that “developed countries have enjoyed large repo markets for government bonds over the years. This facilitates the creation of additional and stable funding sources.”

“With LSF, we aim to provide the same kind of liquidity-supportive atmosphere to African governments as to private investors.”

LSF will collect money from institutions in order to finance the loans. It is anticipated that its $200 million first transaction will be made public in the first quarter next year. This was funded by the African Export-Import Bank.

The LSF stated that it plans to eventually raise $30 billion from the developed worlds in exchange for the International Monetary Fund’s Special Drawing Rights unit.

According to David Escoffier (director of LSF), the board will encourage green or development-linked investment such as green bonds and bonds that are linked to sustainable developments by offering loans with better terms when backed by these types of instruments.

He said that this will encourage investors to purchase them and in turn African governments to issue them.