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Unleashing climate finance flows at COP29 – the role of the NCQG and NDCs

Published

4 hours ago

October 24, 2024

unleashing-climate-finance-flows-at-cop29-–-the-role-of-the-ncqg-and-ndcs

The latest publication from the Energy Transitions Commission (ETC): “NDCs, NCQG, and Financing the Transition”

LONDON, Oct. 24, 2024 /PRNewswire/ — “Climate finance” will be a key subject at COP29, with debate in particular on the proposed “New Collective Quantified Goal” (NCQG) for financial flows from high-income to low-income countries. But the term “climate finance” is often used vaguely and broadly, covering several different challenges and priorities.

The Energy Transitions Commission’s (ETC) latest publication “NDCs, NCQG, and Financing the Transition” therefore clarifies the nature and scale of different types of finance required, and proposes four principles to ensure a useful conclusion of the NCQG debate. It also explains the vital role that updated National Determined Contributions (NDCs) can and must play in unleashing financial flows.

The NCQG and NDCs

The Paris climate pact included a commitment to agree on the extent to which higher-income countries will financially assist low-income countries with mitigation and adaptation. This NCQG will replace the current $100 billion per annum target for climate finance flows from developed to developing countries which was agreed in 2009 but consistently undelivered until 2022.

The NDCs are the crucial mechanism, established by the Paris Conference, through which countries commit to voluntary national actions to reduce emissions, in line with the global objective of limiting global warming to well below 2°C. Countries are required to submit ratcheted NDCs every five years.

Current NDCs (submitted in 2020) put the world on track to overshoot 2°C warming by 2050 even if implemented. Increasing ambition in the next round of NDC is therefore crucial but achievable because dramatic cost reductions in key technologies (in particular solar PV, wind power and batteries) mean that countries can now rapidly reduce emissions while continuing to meet growing demands for affordable energy access and use.

“COP29 debates on the NCQG need to start with a clear definition of the very different categories of “climate finance” and recognition of the different appropriate funding sources. And however the NCQG debates conclude, countries should use updated and more ambitious NDCs to help unleash the private finance which will play the primary role in funding capital investment for mitigation. But it is also essential for development banks to play an increased and more effective role in supporting financial flows to middle and low-income countries.” – Adair Turner, Chair, Energy Transitions Commission.

“Through frameworks like the NCQG and NDCs, countries can set ambitious goals backed by policies that attract large-scale investments from the private sector and can meet the majority of finance needs for climate mitigation and adaptation. Multilateral Development Banks are crucial to providing affordable finance for decarbonising energy systems and building climate resilience in developing nations while ensuring that economic growth aligns with the clean energy transition.” – Nicholas Stern, Chair, Grantham Research Institute on Climate Change.

“Climate finance” – the need for clarity on categories, quantities, and potential sources

The term “climate finance” is often used without distinguishing the types of finance required which are financed in quite different ways. The ETC’s brief draws a clear distinction between:

The capital investments needed to establish zero carbon energy systems globally and mitigate climate change. These investments average around $3 trillion annually until 2050.¹ Most of this investment will be financed by private institutions delivering an attractive rate of return to investors if appropriate real economy policies are in place. Multilateral development banks (MDBs) and other public financial institutions must also play a significant role to support financial flows to middle and low-income countries.
Concessional or grant payments may be required to mitigate emissions in specific areas – in particular, to close coal plants early, end deforestation, and finance carbon removals – which may not generate a return on investment. These payments could come from carbon offset markets, philanthropic funds, or inter-governmental contributions. The ETC estimated $300 billion of this type of payment is required annually, but actual flows are unlikely to reach this magnitude, necessitating other measures, such as strong policy, to achieve emission reductions.
Investments in adaptation – for instance in flood management or coastal protection – to deal with the already inevitable consequences of global warming. The Songwe-Stern 2022 report suggested these might reach $250 billion per annum in middle and low-income countries. A significant part will be financed from domestic resources (especially in middle-income countries) but there is a major essential role for loans provided by MDBs and for concessional payments or grants from high-income countries.
Payments to help lower-income countries cope with the loss and damage already produced by climate change. The Songwe-Stern report estimated that these costs in middle and low-income countries might reach $200–$400 billion per annum by 2030. At COP27 in 2022, the principle was agreed that higher-income countries should contribute towards meeting these costs.

Optimal results from the NCQG debate at COP29

There are widely divergent views on what the NCQG should cover. Some countries believe that “loss and damage” payments should be included, but others argue that the focus should be on mitigation and adaptation finance. India and some Arab countries have called for a headline figure of over $1 trillion per annum but high-income countries have not yet committed to any figure above $100 billion per annum. Many of those high-income countries believe moreover, that the definition of contributing countries should be expanded to include high per capita emissions countries such as Saudi Arabia, UAE and China.

Given this divergence of opinions going into COP29, there is a risk that no consensus will be reached or that the resulting agreement will use vague language that can be interpreted in many different ways.

The ETC’s focus and expertise relate to the challenge of mitigation and we believe that the NCQG will have the best impact on global mitigation efforts if it includes:

Clarity on the different types of investment/payment needed, sources that can meet this need (e.g., private finance, MDB loans, or concessional/grant finance), and what is covered by the NCQG headline figure.
Strong focus on the very large-scale financial flows required to support mitigation in middle and low-income countries (e.g., about $900 billion a year) and the significant role that MDBs must play, including in catalysing private financial flows. Multiple reports have already described what must be done to enable MDBs to play a greater and more effective role.² Analysis should now be replaced by action.
Expansion of the definition of contributing countries to include at least China and high-income oil and gas producers such as Saudi Arabia, UAE, and Qatar because of these countries’ high per capita emissions and low cost of capital.
Strong support for new sources of funds such as:

Global carbon taxes on aviation and shipping as proposed by the Nairobi Declaration.
The allocation of revenues from border carbon adjustment mechanisms (CBAMs) to support climate finance flows to low-income countries.

Key priorities for the NDCs

Most capital investment to drive mitigation will be financed by private institutions (or state-owned companies acting in a market-competitive fashion). But governments have a responsibility to incentivise that investment through well-designed policies. Clearer and more ambitious NDCs could also help by providing certainty about future objectives and supporting policy. The ETC recommends that the next round of NDCs should:

Set more ambitious emission reduction targets to reflect technological progress and cost reductions already made, and align NDC objectives with existing policy commitments.
Define strong links between targets and supporting policy, acting as comprehensive roadmaps for implementation.
Contain absolute or equivalent emissions targets for specific sectors and cover all greenhouse gases.
Identify the investments required to deliver emissions reductions and the broad balance of financing sources envisaged.

Download the briefing note: https://www.energy-transitions.org/publications/ndcs-and-financing-the-transition/

Notes to Editors

¹ In our 2023 report Financing the Transition, the ETC estimated that $3.5 trillion per annum is required for climate mitigation investment between now and 2050. This will be offset by an average annual reduction of $0.5 trillion in fossil fuel investment, to give a net figure of $3 trillion per annum.

² For example, Independent Expert Group (2019), Transforming the Financial System for People and Planet; Blended Finance Taskforce (2021), Better Finance, Better World; European Investment Bank (2022), Joint Report on Multilateral Development Banks’ Climate Finance; OECD (2022), Multilateral Development Finance 2022; International Finance Corporation (2023), Mobilisation of Private Finance by Multilateral Development Banks and Development Finance Institutions.

NDCs, NCQG, and Financing the Transition: Unlocking Flows for a Net-Zero Future builds on previous ETC work including, Financing the Transition and Credible Contributions. It is based on analysis developed in extensive consultation with ETC Members from across industry, financial institutions, and environmental advocacy and constitutes a collective view of the Energy Transitions Commission. However, it should not be taken as members agreeing with every finding or recommendation.

The ETC is a global coalition of leaders from across the energy landscape committed to achieving net-zero emissions by mid-century. For further information on the ETC please visit: https://www.energy-transitions.org

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DFC Expands Global Impact With Record-Breaking Investments in Fiscal Year 2024

Published

35 mins ago

October 24, 2024

CISION (PR Newswire)

Total annual commitments more than doubled since agency’s launch five years ago
Driving global development with more than 180 strategic transactions

WASHINGTON, Oct. 24, 2024 /PRNewswire/ — The U.S. International Development Finance Corporation today announced that it committed a record $12 billion in investments in Fiscal Year 2024 to projects that are improving lives and promoting economic growth across the developing world by expanding access to food, energy, healthcare, critical infrastructure, and financial services.

In Fiscal Year 2024, DFC tackled some of the world’s greatest challenges by supporting transactions in 44 countries, with a total portfolio spanning over 110 countries across Africa, the Middle East, Latin America, Europe, and the Indo-Pacific. DFC’s new commitments are expected to finance 450,000 smallholder farmers, generate 4,600GWh of renewable energy, improve healthcare for more than 11 million patients, and fuel growth for 380,000 micro, small, and medium-sized businesses.

“Fiscal Year 2024 was a remarkable year for DFC, both in terms of volume of investment and our impact on some of the world’s most pressing challenges. In just five years since its creation, DFC’s private-sector-led approach has established DFC as a pivotal instrument in U.S. foreign policy and a key player in the development finance space,” said DFC CEO Scott Nathan. “The new investments made this year will provide badly needed financing to entrepreneurs and businesses, driving economic growth and stability in the countries where we work. I’m proud of the hard work and accomplishments of the DFC team to support development and bolster U.S. national security.”

In Fiscal Year 2024, DFC committed to over 180 transactions. Activity included:

Invested where American values and interests intersect. DFC’s dual focus on global development and American national security helps ensure its investments benefit both the United States and the host countries.

In Angola, DFC’s board approved a loan of up to $553 million to the Lobito Atlantic Railway to support the upgrade and rehabilitation of more than 800 miles of rail and a mineral port to help ensure the reliable transport of minerals that are critical to the clean energy transition. In a related transaction, DFC also committed a $3.4 million technical assistance grant to Pensana to conduct feasibility studies to advance development of a rare earth mine and refining facility in the Lobito Corridor.
In Indonesia, an up to $126 million DFC loan to PT Medco Cahaya Geothermal will finance the development of approximately 31.4MW of geothermal power generation capacity in East Java.
In South Africa, a $50 million equity investment in TechMet will support the development of the Phalaborwa Rare Earths project, a rare earth element processing facility that will develop a more diverse, resilient, and sustainable critical mineral supply chain, drive the clean energy transition, and create economic opportunity for local communities.

Provided critical support to the people and businesses impacted by the war in Ukraine. DFC continued its support for Ukraine, committing more than $580 million to a wide range of sectors crucial to the country’s recovery and stability amid the conflict. This included one of its signature tools to address the most urgent Ukrainian economic needs and lay a foundation for long-term resilience: political risk insurance.

$10 million in political risk insurance will support the rebuilding of a water treatment and water filtration equipment manufacturing facility destroyed during Russia’s invasion.
$50 million in political risk insurance will support a reinsurance facility brokered by Aon and distributed by ARX to build a portfolio of war risk insurance policies for companies operating in Ukraine and to support ARX in expanding its war risk insurance offering in the country.
$150 million in political risk insurance will help maintain the country’s agriculture operations and alleviate food insecurity.

Strengthened global supply chains. DFC invested in infrastructure to bolster access to essential goods and services including food, energy, healthcare, technology, and critical minerals.

In South Africa, a €110 million DFC loan will help Aspen Pharmacare expand its capacity to deliver medicines, diabetes insulin, and pediatric vaccines, increasing local access to life-saving medicines and vaccines across Africa.
In Zambia, a $10 million loan to Seba Foods Zambia Ltd. will support the expansion of the company’s storage and production capacity and provide affordable, soy-based consumer food products, strengthening the food value chain in Zambia.
In Türkiye, a $350 million loan to Enerjisa Enerji Üretim A.Ş. will finance the development, construction, and operation of nine onshore wind power plants in Western Türkiye that are expected to generate approximately 2.51 terawatt-hours per year.

Advanced high-standard, transparent investing to achieve sustained impact. DFC adheres to the highest standards on worker rights and the environment and works to ensure its investments deliver a sustained positive impact.

In India, DFC committed a $10 million loan to Nepra Resource Management for construction of material recovery facilities for the recycling and sustainable disposal of material waste that will reduce waste in landfills.
Across Africa, a $250 million tier 2 capital loan to Africa Finance Corporation will strengthen the capital position of a key pan-African multilateral development finance institution to support its operating activities, including investment activities consisting of infrastructure projects critical to economic growth and development.
In the Western Hemisphere, a $50 million equity investment in PI Fund V (Ontario), L.P. will increase investments in Latin American infrastructure and address financing gaps to develop critical projects, with a primary focus on Brazil, Colombia, Peru, and Mexico.

Supported the world’s low-income countries and underserved communities. DFC focuses a majority of its transactions in low- and lower-middle-income countries and prioritizes investments that benefit women and other underserved populations.

In India, a $50 million loan to InCred Financial Services Ltd. will support lending to women and women-owned businesses using a technology-enabled lending approach designed to expand access to underserved entrepreneurs and individuals.
In the Dominican Republic, where nearly one quarter of the population lives below the poverty line, DFC committed $200 million in financing to Banco Popular Dominicano, S.A. to support lending to small businesses, with a focus on women entrepreneurs.
In the Philippines, DFC committed a $20 million loan to Lhoopa Singapore Pte. Ltd. that will support a digital platform focused on the development of affordable housing for low-income families throughout the country.

Learn more about DFC’s record-breaking year.

The U.S. International Development Finance Corporation (DFC) partners with the private sector to finance solutions to the most critical challenges facing the developing world today. We invest across sectors including energy, healthcare, infrastructure, agriculture, and small business and financial services. DFC investments adhere to high standards and respect the environment, human rights, and worker rights.

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H.I.G. WhiteHorse Europe Provides Financing to Altares

Published

2 hours ago

October 24, 2024

CISION (PR Newswire)

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LONDON, Oct. 24, 2024 /PRNewswire/ — H.I.G. WhiteHorse Europe, a credit affiliate of global investment firm H.I.G. Capital (“H.I.G.”), is pleased to announce that it has arranged a financing package for Altares (“Altares” or the “Group”).

Supported by Naxicap Partners since 2016, Altares is a leader in the business data and analytics market, offering its expertise to B2B customers across the entire data value chain in Finance Intelligence, Sales Intelligence, ESG, and Compliance.

H.I.G. WhiteHorse Europe acted as sole arranger and sole underwriter of a €93 million financing package, which will refinance Altares’ existing indebtedness and support its next stage of growth.

Luc Querton, President of Altares, said: “We strive to reveal growth opportunities for our clients, support them in managing credit risks, advise them on the ESG profiles of their third parties, and help ensure compliance with applicable regulations. This financing allows us to sustain our growth while continuing to deliver innovative technologies which meet our clients’ increasingly complex requirements across these four areas.”

Pascal Meysson, Head of H.I.G. WhiteHorse Europe, said: “Altares benefits from a unique brand image and leadership position in the growing business data, digitalization, and analytics industry. The financing we provided reflects our confidence in the expansion strategy implemented by Altares’ management team, alongside Naxicap Partners.”

About Altares

A leader in business insights, Altares collects, structures, analyses and enhances B2B data to make them “smart” and powerful to facilitate decision-making by its customers. The Group offers its expertise across the entire data value chain in financial risk, compliance, sales and marketing, and master data management. Altares has an exclusive partnership in France, Benelux and North Africa with Dun & Bradstreet, the world’s leading global provider of business decisioning data and analytics for almost 200 years. This makes Altares the partner of choice for executives in all sectors offering them unprecedented access to database of over 550 million companies in more than 240 countries. For more information, visit altares.com.

About Naxicap Partners

As one of the top private equity firms in France, Naxicap Partners has €6.7 billion in assets under management. As a committed, responsible investor, Naxicap Partners builds solid, constructive partnerships with entrepreneurs so that their projects can succeed. The firm has 95 investment professionals spread across five offices in Paris, Lyon, Toulouse, Nantes, Frankfurt, and Zurich. For more information, visit naxicap.com/en.

About H.I.G. Capital

H.I.G. is a leading global alternative investment firm with $65 billion of capital under management.* Based in Miami, and with offices in Atlanta, Boston, Chicago, Los Angeles, New York, and San Francisco in the United States, as well as international affiliate offices in Hamburg, London, Luxembourg, Madrid, Milan, Paris, Bogotá, Rio de Janeiro, São Paulo, Dubai, and Hong Kong, H.I.G. specializes in providing both debt and equity capital to middle market companies, utilizing a flexible and operationally focused/value-added approach:

H.I.G.’s equity funds invest in management buyouts, recapitalizations, and corporate carve-outs of both profitable as well as underperforming manufacturing and service businesses.
H.I.G.’s debt funds invest in senior, unitranche, and junior debt financing to companies across the size spectrum, both on a primary (direct origination) basis, as well as in the secondary markets. H.I.G. also manages a publicly traded BDC, WhiteHorse Finance.
H.I.G.’s real estate funds invest in value-added properties, which can benefit from improved asset management practices.
H.I.G. Infrastructure focuses on making value-add and core plus investments in the infrastructure sector.

Since its founding in 1993, H.I.G. has invested in and managed more than 400 companies worldwide. The Firm’s current portfolio includes more than 100 companies with combined sales in excess of $53 billion. For more information, please refer to the H.I.G. website at hig.com.

*Based on total capital raised by H.I.G. Capital and affiliates.

Contact:

Pascal Meysson
Head of H.I.G. WhiteHorse Europe
[email protected]

Laurent Vaille
Principal
[email protected]

H.I.G. WhiteHorse Europe
10 Grosvenor Street
2nd Floor
London W1K 4QB
P +44 (0) 207 318 5700
hig.com

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Xsolla significantly expands payment solutions in Cambodia and Indonesia to maximize game developers’ reach

Published

3 hours ago

October 24, 2024

Adrienn Sarkany

xsolla-significantly-expands-payment-solutions-in-cambodia-and-indonesia-to-maximize-game-developers’-reach

Xsolla, a global video game commerce company, is pleased to announce the expansion of its payment solutions in Cambodia and Indonesia, providing access to localized payment methods tailored to each region. This initiative aligns with Xsolla’s broader strategy to strengthen its presence across Southeast Asia (SEA) and support game developers in effectively monetizing and distributing their games in these rapidly growing markets.

In Cambodia, Xsolla introduces eight new payment methods, including Internet banking options and digital wallets, tailored to the preferences of Cambodian users. This strategic expansion covers up to 90% of the payments market, ensuring that nearly every player in Cambodia can pay using their preferred method. For example, Bakong KHQR, a QR code-based payment system, holds 45% of the market share, while Acleda Bank accounts for 15%. Supported by the country’s ongoing digital transformation, with digital payment transactions surging by 28.7%, these solutions, including Wing Money, Pi Pay, and others, will enable game developers to reach nearly 2 million gamers in Cambodia, facilitating seamless checkout experiences and boosting sales.

In Indonesia, Xsolla is introducing several new payment methods to help game developers tap into the country’s vast gaming market, with over 185 million gamers out of a 275 million-strong population. Approximately 80% of consumers in Indonesia are unbanked or underbanked. With smartphone penetration reaching up to 80%, Alternative Payment Methods (APMs) are the most preferred option in Indonesia. By integrating these APMs, Xsolla can cover up to 90% of the market. This includes E-wallets, which account for 39% of the market, Bank Transfers at 27%, Cards at 17%, and Cash at 11%. Popular platforms such as ShopeePay, Jenius, and Akulaku are among the new payment options, simplifying transactions for Indonesian gamers and boosting market reach for game developers in one of the fastest-growing digital markets globally.

“Xsolla’s commitment to empowering game developers to access new markets is central to our mission. By introducing localized payment methods in Cambodia and Indonesia, we provide our partners with the tools they need to succeed in these dynamic and rapidly growing gaming environments. This expansion is part of our ongoing efforts to support developers globally and help them overcome payment challenges,” said Chris Hewish, Chief Strategy Officer of Xsolla.

The gaming market in Cambodia is projected to reach $75.21 million by 2027, with mobile games accounting for 66% of the revenue in 2023. In Indonesia, digital transformation opens up significant opportunities for game developers, mainly through localized payment solutions that reduce friction and improve transaction success rates.

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