G20 communique: Important step towards derisking renewable investment for developing countries

PRESS RELEASE

Scaling up renewable energy in developing countries is mission-critical for addressing the climate emergency and providing clean, safe energy for hundreds of millions who need it.

A major block has been the mispricing of the cost of capital making prospective renewable projects unprofitable. Stamp Out Poverty has been working with leading finance economists, such as Avinash Persaud, supporting the development of innovative financing structures to tackle this. National government platforms of developing countries, supported by multilateral development banks and others can create a clear, transparent mechanism for attracting international private investment, hedging the cost of capital risks, and ensuring investment benefits the projects and communities most in need.

In a landmark move for the initiative, the G20 has recognised the importance of this approach and agreed that ‘relevant institutions should work to ensure that risks are well captured, including by exploring to increase the transparency of credit ratings and country risk assessments.’ It further supported ‘the voluntary building-up of country platforms as one of the possible instruments to boost sustainable finance in emerging markets and developing economies. Platforms that are country-led, flexible, and well adapted to national circumstances work as efficient instruments to mobilize both public and private capital to finance projects and programs in developing countries, helping match mitigation, adaptation, and resilience building challenges with concrete flows of resources for just transitions.

Avinash Persaud, international finance expert and an architect of the Bridgetown Initiative said:
“Reducing the cost of capital for developing countries has been recognised as a priority at the G20 Summit to address the climate crisis on a global scale. By unblocking climate finance and making it more affordable for these nations, we empower them to supercharge renewable energy investments and build resilience—an urgent necessity in today’s climate landscape.

The G20 has a key role to play in supporting the streamlining of climate funds, managing foreign exchange risk, and enhancing transparency. These are critical steps not only for effective climate action but also for tackling global hunger and environmental degradation.”

David Hillman, Director of Stamp Out Poverty, said:
“This welcome development sets the scene for a step change in the scale of investment in tried and tested renewable energy production, such as wind and solar, in developing countries. After encouraging and supporting this area of work over the last two years, we are delighted to see it being supported at the G20 Summit.”

NOTES TO EDITORS

1. The G20 Communique:

45. Underlining the importance of progress towards making finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development, we welcome the initiative taken by Brazil’s G20 Presidency to establish the Task Force on a Global Mobilization against Climate Change (TF-CLIMA), bringing together the Sherpa and Finance tracks, while helping further mainstream climate change into the global financial, economic and development agendas. Building on TF-CLIMA, we will cooperate and join efforts to identify and address structural barriers to foster private L capital flows for climate action, particularly for developing countries. We recognize that relevant institutions should work to ensure that risks are well captured, including by exploring to increase the transparency of credit ratings and country risk assessments.

46. We will accelerate the reform of the international financial architecture so that it can meet the urgent challenge of sustainable development, climate change and efforts to eradicate poverty. We support the voluntary building-up of country platforms as one of the possible instruments to boost sustainable finance in emerging markets and developing economies. Platforms that are country-led, flexible, and well adapted to national circumstances work as efficient instruments to mobilize both public and private capital to finance projects and programs in developing countries, helping match mitigation, adaptation, and resilience building challenges with concrete flows of resources for just transitions.

https://www.gov.br/planalto/pt-br/media/18-11-2024-declaracao-de-lideres-g20.pdf

2. Avinash Persaud is special advisor on climate change to the President of the Inter-American Development Bank (IDB) and was a key figure in the Loss and Damage Fund negotiations.

3. Stamp Out Poverty
Stamp Out Poverty is an NGO with a long record of policy development in innovative finance solutions bringing together leading economists and thinkers with civil society to develop and champion powerful, practical ideas to raise the money needed to end extreme poverty and fight climate change. Ideas that bring accountability to the industries behind these problems.

For further information and comment contact:
David Hillman, Director, Stamp Out Poverty: dhillman@stampoutpoverty.org