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By Zack Colman | 05/17/2024 06:26 AM EDT
A new model to coax private investors into developing nations is facing difficulties due to economic hurdles such as high interest rates and heavy debt.
Wealthy nations have focused on a new financing approach to drive more private-sector climate investment to developing nations, but they are falling far short of annual needs. Guy Peterson/AFP via Getty Images
The centerpiece of the rich world’s strategy for raising trillions of dollars to help developing countries cope with climate change is struggling to take off.
The U.S. and other countries are betting that public and philanthropic money for clean energy and infrastructure projects will attract funding from banks and deep-pocketed investors. But those hopes are running into a harsh reality: Private investors are wary of pouring money into unfamiliar markets struggling with economic hurdles such as high interest rates and heavy debt.
“We are not making progress, particularly in the area of private capital,” Barbados Prime Minister Mia Mottley said at an April event hosted by the Rockefeller Foundation. “How do we get the markets, the credit rating agencies, the owners of private capital to understand — that unless they’re hiding from us a plan to live on Mars — that it needs to change very fast?”
The so-called blended finance model that wealthy countries are pushing aims to address an intractable problem — coming up with the huge amounts of money needed to help poorer nations cut their greenhouse gas emissions, build clean energy grids and protect themselves from storms, droughts and rising sea levels linked to climate change.
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