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The Big Push for Transformation through Climate and Development

This report makes the case for a big investment push for EMDEs’ sustainable recovery and development, assesses the magnitude and composition of such investment, presents actions needed for an energy transition, looks at the role that innovations and state capacity can play in facilitating GRID, and proposes actions that governments, the private sector, MDBs, the IMF, and donors can undertake to mobilize financing at the large scale needed.

Key points
  • A big and urgent investment push is needed, but the investments need to be resilient and transformational, not incremental.
  • Among key systems transformations, energy is critical, with energy access, affordability, and security as key considerations for delivering a just energy transition that meets development and sustainability goals
  • Adaptation and resilience measures must complement investments in mitigation to respond to the growing vulnerability to climate change.
  • The starting point for the sizable investment push required must be strong country leadership and coordinated action.
  • The realization of needed human, physical, natural, and social capital investments requires an enabling environment with a strong emphasis on development and sustainability.
  • Given the urgency of action, coordination mechanisms to support investment and transition strategies in priority sectors offer a promising way to impart momentum.
  • For the investments and structural transformation described in the foregoing to take place, EMDEs will require additional financing in the trillions, not the billions.
  • Different sources of financing will be needed given the different types of investment required.
  • Concessional financing for public goods in MICs needs to be additional and not come at the expense of the huge needs of LICs
  • An integrated debt and financing strategy is needed to overcome constraints to financial access, particularly for climate financing, and mobilize the necessary scale and mix of financing for GRID.
  • A large share of the needed financing for GRID can be expected to come from domestic sources.
  • An immediate challenge is to address debt vulnerabilities and bring down the cost of capital for new investments in EMDEs.
  • There is great potential, opportunity, and need for a sizable stepping up in private investment and financing.
  • Concessional finance to de-risk private investment will also be needed at scale.
  • Beyond mobilizing private financing, emphasis must be placed on aligning the financial system with climate and development objectives.
  • Donors will also need to significantly step up their efforts to help EMDEs finance their investment requirements.
  • The urgency, complexity, and transnationality of existing challenges requires all relevant stakeholders
    to do much more and in a more coordinated manner, working in tandem toward joint agreed-upon goals.