通过审慎监管澄清和改革加强新兴市场和发展中经济体的气候融资

Policy brief •Private climate finance to emerging markets and developingeconomies (EMDEs) is falling, despite these countries representing25% of global GDP and requiring an additional US$450–US$550billion annually in external climate investment by 2030. •Basel III rules, as currently interpreted, unintentionally discourageEMDE lending, including by unnecessarily limiting recognition ofrobust credit enhancement tools. •Project finance is treated highly conservatively under Basel capitalcalculation approaches, despite strong data showing lower-than-expected default rates and high recovery rates over time. •Country risk ceilings often overstate risk for EMDE exposures,limiting bank participation even in high-quality, co-financedprojects – thus driving up the cost of capital. •Targeted clarifications and reforms to the Basel Framework couldunlock significant volumes of private investment– increasing,we estimate, the bank capital available for high-impact, climate-aligned EMDE projects in emerging markets by 3-4x, withoutcompromising financial stability. Table of contents Introduction........................................................................................ 3Barriers to EMDE climate finance.................................................4Recommendations........................................................................... 6 Introduction Emerging markets and developing economies (EMDEs) havea critical role to play in achieving global climate goals underthe Paris Agreement. Yet, these countries face a persistentshortfall in climate finance, with private capital flowsdeclining over recent years. In line with the ambition of the 2024 United Nations ClimateChange Conference (COP29) and the New CollectiveQuantified Goal (NCQG), external finance from all sources– including international public, private, and other channels– must contribute approximately US$1 trillion annually by2030, rising to around US$1.3 trillion by 2035, to meet totalclimate investment needs in EMDEs.1 Despite accounting for roughly a quarter of global GDP, EMDEs (other than China) attract just14% of global climate finance flows. According to the Independent High-Level Expert Groupon Climate Finance, these economies currently receive only around US$30 billion of externalprivate finance and will require an additional US$450–US$550 billion per year in externalfinance by 2030 to remain on a net-zero trajectory – an increase of 15 to 18 times2. Mobilisingthis scale of investment is essential to global climate outcomes and financial stability alike. In this context, policymakers have repeatedly emphasised the importance of mobilising muchhigher levels of private investment in EMDEs – most recently as part of the Baku to BelemRoadmap at COP29. Moreover, multilateral development banks (MDBs) and developmentfinance institutions (DFIs) have introduced a range of enhanced tools to address prevailingmarket gaps. However, this collective effort is hindered by aspects of the Basel III prudential framework thatunintentionally deter bank lending to EMDEs. Banks within the network of the InternationalChamber of Commerce (ICC), the world’s largest business organisation, report severe difficultiesin meeting capital efficiency thresholds for projects in EMDEs – while some have exited oractively avoid emerging markets entirely. Others report passing on additional risk costs to EMDEborrowers – in effect negating the intended pricing impact of concessional finance. We welcome increasing international efforts to highlight these barriers, including by theGlasgow Financial Alliance for Net Zero (GFANZ) and the Institute of International Finance (IIF).It is now time to translate this growing momentum into action and practical solutions. This note summarises key barriers within the prudential framework and outlinesrecommended actions to align capital regulation with climate and development goals whilemaintaining financial stability. Barriers to EMDE climate finance Insufficient recognition of public risk mitigation tools Multilateral development banks and development finance institutions play a vital role inreducing the risk profile of EMDE investments through credit guarantees and co-lendingstructures. While the Basel Framework, a globally agreed set of standards for the prudentialregulation of banks, permits the use of MDB/DFI guarantees for capital relief, strict operationalrequirements limit their applicability: •Unconditionality requirements: Guarantees must be unconditional, yet widely used MDBproducts, such as non-honouring guarantees of the Multilateral Investment GuaranteeAgency (MIGA), include standard (but rarely used) exclusions that render them ineligiblefor capital relief purposes. •Timeliness requirements:Key instruments like political risk insurance (PRI) or breach ofcontract protections must pay out promptly after a default to qualify for capital relief,but most instruments used in EMDEs involve processes (e.g. arbitrat