SARB Deputy Governor

Cape Town, South Africa – The South African Reserve Bank (SARB) Deputy Governor, Fundi Tshazibana, has emphasised the critical need for a blended finance approach to fund climate change mitigation and adaptation, particularly in emerging markets and developing economies.

Speaking at the Group of Twenty (G20) side event on enhancing the global sustainable financial architecture in Cape Town on Tuesday, Tshazibana highlighted the increasing urgency of climate finance in facilitating the global transition towards sustainability.

“The Climate Policy Initiative (CPI) global landscape of climate finance has found that concessional finance at present is only at about 11% of total climate finance for the bulk of our governments, especially in emerging markets and developing countries,” said Tshazibana.

“We know that the fiscal space for governments is quite tight, which means governments cannot go this journey alone. In this regard, private sector finance, which comprises a third of the world’s economic activities, will be vital to close the financing gap. However, private investment will require a catalyst to mitigate certain risks and to facilitate market development.”

The Climate Finance Gap: A Trillion-Dollar Challenge

Despite progress in global climate financing, the gap remains substantial. Tshazibana pointed out that although climate finance has doubled from $674 billion in 2018 to about $1.4 trillion in 2022, it still falls significantly short of the estimated $7.4 trillion required annually to limit global temperature increases to 1.5°C.

“In 2022, we reached the $1 trillion milestone in climate finance, but analysis by the CPI shows that although climate finance has doubled since 2018, there are still significant gaps in terms of what needs to be funded,” she said.

The CPI’s estimates suggest that in order to maintain progress toward global climate targets, financial flows must be directed more effectively across sectors, particularly in transport, agriculture, forestry, and industrial initiatives.

“The largest climate investment gaps in absolute terms have been observed in the transport sector, but we know that we need increased investment in agriculture, forestry, and other land use as well as industrial initiatives. Financing needs are also significant in the area of adaptation,” Tshazibana explained.

A Blended Approach: Public-Private Partnerships Are Key

To bridge the climate financing gap, Tshazibana advocated for a blended finance approach that involves both public and private sector participation. She cited studies from the Network for Greening the Financial System (NGFS) and the World Bank, which indicate that a combination of funding sources is essential for both climate change mitigation and adaptation.

According to Tshazibana, co-financing strategies can boost total project funding while diversifying financial instruments to attract private sector investment. She stressed that governments alone cannot carry the financial burden, making partnerships and collaborations across development actors crucial in unlocking private capital and accelerating global climate investment.

“Partnerships and collaboration involving multiple development actors can unlock private funding and accelerate global climate investment while increasing the efficiency of scarce concessional funds,” she said.

The Role of Institutional Partnerships in Climate Finance

Tshazibana outlined the various forms that institutional partnerships can take to enhance climate financing, including:

• Co-financing arrangements, where public and private sector actors jointly invest in climate projects.
• Project preparation and capacity-building initiatives, designed to strengthen the ability of developing economies to access and manage climate finance.
• Policy support and risk mitigation strategies, aimed at reducing investment barriers and encouraging more robust private sector involvement.

She highlighted that leveraging complementary institutional advantages could create a more sustainable and efficient climate finance ecosystem.

“These partnerships leverage distinct and complementary institutional advantages and could take many forms, such as co-financing, project preparation, capacity-building, policy support, and risk mitigation,” Tshazibana added.

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