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How to Unblock Green Investment in Developing Countries

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How to unblock green investment in developing countries

By Avinash Persaud

June 19, 2023

We face the brutal reality that catastrophic climate change is upon us unless we direct massive private-sector capital flows towards the green transition in developing countries. Though rich countries contributed 70% of the stock of greenhouse gases causing global warming, developing economies now contribute over 63% of greenhouse gas emissions. And rising. There is no pathway for the world to remain below critical climate tipping points that does not include an accelerated investment in the green transformation of emerging economies.

The scale of the problem has been well-mapped. The 2022 report of the High-Level Expert Group on Climate Finance estimated that by 2030 annual investments exceeding $2.4 trillion are needed in developing countries, of which, given the scale and limits of domestic resources, up to $1 trillion will need to be foreign private investment.

But international and domestic capital is not heading there at the scale or pace required to save the planet. Solving this problem requires recognizing some realities about the functioning of the international financial system and coming up with solutions that meet the challenge with equity, scale and pace.

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