By Tom Arnold
(Reuters) – Investments into clean energy projects in emerging markets have faltered in the aftermath of the COVID-19 crisis and policy reforms are needed to help flows revive, said the head of the $8.5 billion Climate Investment Funds (CIF).
The pandemic had exacerbated a systemic issue of not enough flows heading into emerging economies, CIF chief executive Mafalda Duarte told the Reuters Impact conference.
Clean energy investment in emerging markets hit a record $32 billion in 2019, with 84% of that from private capital, Duarte said.
“What we are seeing right now is a reverse of that trend and we should really be paying attention to that,” said Duarte. “We already had a systemic issue … of not enough flows going into developing countries, but that situation has now become even more serious.”
CIF, which has $8.5 billion in assets under management, has financed well over 300 environmentally friendly energy projects in some 72 countries.
Emerging markets are an essential part of the push towards a net zero world. Nine out of the 20 largest global carbon dioxide emitters are emerging markets, with coal accounting for around 44% of energy used in such countries.
But in order to attract more investment, policy reforms were needed, said Duarte.
“Its not enough to have clean energy targets,” she said. “Unfortunately, only 41% of those that have these goals have the nuts and bolts policies that can actually support and enable the investments.”
Usha Rao-Monari, secretary-general and associate administrator, United Nations Development Programme (UNDP), agreed that shortfalls in the “enabling environment” acted as a deterrent to investment.
“Whether it is barriers for IPPs (independent power producers) to access grids, whether it is permit processes and so on, it is the enabling environment that makes investors feel that this is not something that they might be very interested in, particularly in emerging markets,” she said.
The UNDP was working with governments to launch “de-risking” renewable energy investment frameworks to promote private sector investment, said Rao-Monari.
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(Reporting by Tom Arnold; Editing by Alex Richardson)
