Scaling Up Sustainable Finance and Investment in the Global South

Edited by Dirk Schoenmaker and Ulrich VolzScaling Up Sustainable Finance and Investment in the Global South Emerging market and developing economies (EMDEs) have enormous investment needs in climate mitigation and adaptation and other areas to attain better and more inclusive economic, social and environmental conditions to achieve the Sustainable Development Goals (SDGs). Most EMDEs also face significant impacts and risks from climate change and nature loss that need to be accounted for by the financial sector. Central banks and supervisors as well as banks and other financial institutions in EMDEs are increasingly seeking to address sustainability risks and scale up sustainable lending and investment.Previous attempts to mobilise private international climate and SDG finance at scale through project-based de-risking have not been successful and are unlikely to deliver at a time when private capital is retreating from EMDEs. To close the climate investment and SDG financing gap, mobilising domestic financial resources through the local banking system and capital markets and channelling them into domestic investments will be crucial. It is also important to find better approaches to mobilise international capital. Multilateral development banks play a key role in concessionary financing.This eBook examines the challenges and opportunities of scaling up sustainable finance and investment in the Global South, and reviews existing practice. The first part of the eBook comprises thematic chapters exploring how the public sector (public banks and central banks) and the private sector (institutional investors and banks) can develop new policies, approaches and instruments and team up to scale up sustainable finance and investment in the Global South. The second part comprises regional and country case studies.33 Great Sutton Street | LONDON EC1V 0DX | UK187 boulevard Saint-Germain | 75007 Paris | FranceTEL: +44 (0)20 7183 8801 | EMAIL: CEPR@CEPR.ORGWWW.CEPR.ORGISBN: 978-1-912179-66-49 781912 179664ISBN 978-1-912179-66-4Scaling Up Sustainable Finance and Investment in the Global South Scaling Up Sustainable Finance and Investment in the Global South CEPR PRESSCentre for Economic Policy Research33 Great Sutton StreetLondon, EC1V 0DX, UK187 boulevard Saint-Germain75007, Paris, FranceTel: +44 (0)20 7183 8801Email: cepr@cepr.orgWeb: www.cepr.org ISBN: 978-1-912179-66-4Copyright © CEPR Press, 2022. Scaling Up Sustainable Finance and Investment in the Global SouthEdited by Dirk Schoenmaker and Ulrich VolzSUSTAINABLEFINANCE CENTRE FOR ECONOMIC POLICY RESEARCH (CEPR)The Centre for Economic Policy Research (CEPR) is a network of over 1,500 research economists based mostly in European universities. The Centre’s goal is twofold: to promote world-class research, and to get the policy-relevant results into the hands of key decision-makers.CEPR’s guiding principle is ‘Research excellence with policy relevance’.A registered charity since it was founded in 1983, CEPR is independent of all public and private interest groups. It takes no institutional stand on economic policy matters and its core funding comes from its Institutional Members and sales of publications. Because it draws on such a large network of researchers, its output reflects a broad spectrum of individual viewpoints as well as perspectives drawn from civil society.CEPR research may include views on policy, but the Trustees of the Centre do not give prior review to its publications. The opinions expressed in this report are those of the authors and not those of CEPR.Chair of the Board Sir Charlie BeanFounder and Honorary President Richard PortesPresident Beatrice Weder di MauroVice Presidents Maristella Botticini Ugo Panizza Philippe Martin Hélène ReyChief Executive Officer Tessa Ogden ContentsForeword viiIntroduction 1Ulrich Volz and Dirk SchoenmakerPart I: Mitigating risks and harnessing opportunities1 Firms and finance during the green transition 11Ralph De Haas, Ralf Martin, Mirabelle Muûls and Helena Schweiger2 Mobilising long-term finance in the Global South: Lessons from the ‘South’ and ‘North’ 21Richard Mark Davis, Aaron Levine, Robert Rusconi and Fiona Stewart3 Unleashing climate investment in Africa 35Rabah Arezki4 Bridging green infrastructure and finance 45Karim El Aynaoui and Otaviano Canuto5 Inspiring sustainable recovery through sustainable bond markets in ASEAN+3 61Kosintr Puongsophol, Shu Tian and Satoru Yamadera6 The potentials and limitations of blende