‘Global transition will be won or lost in emerging economies’ PRI panellists warn
At this week’s PRI in Person conference, investors turned their focus to one of the biggest challenges in climate finance - how to scale private investment into emerging markets and accelerate funding for climate solutions in the Global South.
Taking place just days before the kick-off of COP30 in Belém, the role of financing climate mitigation and adaptation in emerging markets emerged as a key theme of the event, which was discussed among others on a panel on scaling $1.3trn.
The panel, chaired by Nathan Fabian, chief sustainable systems officer at PRI aimed to zoom in on a specific target set at COP29, the Baku Finance Goal, whereby nations aim to mobilise at least $1,3trn per year by 2035. Introducing the ambition, Fabian stressed that: “the global transition will be won or lost in emerging economies.”
Ana Toni, executive director at the COP30 Presidency, stressed that this will be the “implementation COP”, focused on stakeholder engagement and concrete action.
She underlined the need to respect sovereign choices in sustainable development, warning that solutions must work within national contexts rather than impose uniform models.
Overcoming structural barriers
Avinash Persaud, special advisor to the president on climate change at the Inter-American Development Bank (IDB), highlighted a stark imbalance: only 2% of institutional investment currently flows into emerging markets. “That’s a problem for climate, because emerging markets are now responsible for the majority of emissions,” he said.
He noted that traditional views of finance assume that well-performing projects will automatically attract investment, but this is not how capital markets work. “Money is highly differentiated. Pension funds and insurance companies are regulated and constrained — they want investment-grade securities in hard currency. That’s the scalable part, the part that turns billions into trillions. But we’ve been trying to drag money into exciting projects that are not yet constructed, not yet rated, and often denominated in local currency.”
Persaud warned that global financial regulations such as Basel III and Solvency II are unintentionally discouraging investment in emerging markets. “We have to ensure that regulation doesn’t prevent investors from accessing these markets,” he said, adding that renewables are often funded in local currencies, while fossil fuels tend to be backed by hard currency, a structural imbalance that reinforces the status quo.
Asset owner perspective: building the right institutional framework
For Bertrand Millot, head of sustainability at Canadian Pension fund La Caisse; progress depends not only on the flow of capital but on creating the right institutional framework. “The thinking is starting to coalesce,” he said. “There’s a lot of focus on finance, but the institutional setup is crucial. Attracting companies willing to partner is key to success.”
Millot explained that La Caisse’s strategy has focused on re-establishing strong partnerships, such as its collaboration with DP World Port Dominique in Chile. “Banks are not long-term investors, they are transactional. They should be advising governments to structure transactions and ensure they are ready to attract investors. As long-term investors, we can’t be advising governments and then buying the same projects; we have to wait until they’re ready.”
He noted that La Caisse has already invested $5bn in Brazil and is involved in a blended finance initiative called Scaled, supported among others by AXA, Allianz and Zurich. “The idea is to simplify blended finance and make it more user-friendly, creating a single window where fund managers can access blended finance on common terms,” he said. The initiative is expected to close in June next year.
Yet, Millot added, finance alone is not enough. “It’s good to talk about tweaking finance, but one of the key issues is: where are the projects? As a Canadian investor, we’re not going to tell governments where to build pylons or water plants. I’d like to see a list of projects that are shovel-ready and need financing. We also need to think about the enabling environment.”
The role of insurance in scaling up
Antoine Gérard, vice president of finance and strategy at AXA Brazil, said the insurance sector has a crucial role to play in enabling finance to flow at scale. “Insurance has traditionally been very conservative, but it is changing fast — and the opportunity is immense,” he said. AXA, which manages €30bn in emerging markets, is now partnering with development banks to de-risk investment and support project development. “We need scale, and we need to bring more projects to the table” he added.
Regulating for delivery
Rachel Kyte, the UK government’s special representative for climate, reflected on the lack of follow-through since the Paris Agreement. “We’ve come part of the way, but we haven’t gone at pace,” she said. “After Paris, we all went home feeling quite proud, but we didn’t follow through on some key parts, particularly the need for every part of the economy to be regulated. We left too much to voluntary action. It worked to a point, but it hasn’t produced the shift in financial architecture that’s required.”
Kyte warned that climate impacts are arriving sooner than expected: “We are now witnessing climate effects we thought we’d see in the late 2030s.” She called for greater discipline in investment sequencing: “We have to meet grid capacity targets before investing in renewables. It’s about getting the fundamentals right.”
