Local climate finance ‘key to emerging market transitions’

Local banks are key to creating “climate-smart” finance opportunities in emerging markets (EMs), according to an article written for the World Economic Forum. Milagros Rivas Saiz (chief of advisory services at Interamerican Development Bank Group), Ayla Majid (founder and chief executive officer of Planetive) and Michael Hayes (global head of renewables at KPMG) argue that local climate finance and, in particular, local banks will be critical in enabling EMs to meet the significant financing needs of the transition. The authors provide an outline of the challenges faced by local banks in EMs: weak balance sheets, low credit ratings, lack of climate-related institutional capacity and challenges in accessing global pools of climate capital partnerships, among others. They argue that if these challenges can be tackled, significant progress can be made. As examples of this, the article discusses the Global Infrastructure Facility (GIF) and IDB Invest's work in Ecuador. Many emerging markets have bank-dominated lending markets, which makes local banks critical stakeholders in the economy’s net-zero strategy.