Egypt-ICF builds drumbeat around Finance Day at COP27

Finance Day is an annual event held during the Conference of the Parties (COP) to drive public and private finance for countries that are most vulnerable to climate change to build resilience.

Two panel discussions were organised on the third day of the Egypt-International Cooperation Forum (Egypt-ICF) in its second edition. The sessions, entitled "On The Road To Cop27: Pre-Finance Day – Innovative Climate Finance and Access" and "Investing in Sustainable Infrastructure for a Just Transition", aimed to create momentum and push the needle forward around Finance Day that is scheduled to be held during COP27.
Finance Day is an annual event held during the Conference of the Parties (COP) to drive public and private finance for countries that are most vulnerable to climate change to build resilience.
In a recorded message, Secretary-General of the Organization for Economic Co-operation and Development (OECD), Mathias Cormann, stated Africa can steer the world's transition towards Net Zero, noting that 12 countries in Africa represent over 40% of total emissions from the continent.
According to the OECD's latest analysis, climate finance from developed to developing countries reached only $3.3bn in 2020, which is still short of the $100bn goal. Between 2016 and 2020, African countries received an average of 26% of climate finance goals, he noted.
Cormann explained that Egypt's COP27, scheduled to be held in November, will be a defining moment to turn the tide and advance financing of planning mitigation and adaptation, adding that the OECD stands ready to play its part.
"We will continue to advocate for greater ambition and implementation, provide transparency on climate finance, and promote the policy reforms needed to align finance with net zero climate resilient goals. For example, we are working with the Egyptian presidency and other partners on the Sharm El-Sheikh Guidebook for Just Financing to identify opportunities to cover the needed finance for the Net Zero transition," he said.
"For Africa, achieving energy and climate objectives means more than doubling energy investments this decade, up to $190bn each year from 2026 to 2030," Cormann said.
During the event, Minister International Cooperation Rania Al-Mashat, stated that COP27 represents the voice of the South and the needs of the African continent in particular. The Minister added that the key message that needs to be realized on the world stage is that climate change should not necessarily be a burden on countries if there is adequate finance that can build their resilience.
Al-Mashat added that Egypt ICF presents a practical example of how countries in the South can integrate climate and development objectives through the Egypt Country Platform for NWFE (Nexus of Water, Food and Energy) to drive more finance in adaptation.
Mafalda Duarte, CEO of the Climate Investment Funds (CIF), noted that the developed countries pay an average interest of 1% on their debts, while developing countries pay an average of 3%, and in Africa a large number of countries pay 8%.
"However, most of the credit rating downgrades have taken place in Africa," she said. "Therefore, Africa is paying a risk premium, despite the improvement in economic growth prospects, which is why Egypt's mission at the COP27 climate summit is to identify the financing challenges while we seek to accelerate the implementation of projects," Duarte stressed.
She explained that we need credit rating companies to start developing long-term debt ratings that take into account climate considerations, referring to the drop in debt issuance in 2021 in low-rated countries from $30bn to $7.5bn.
On her side, Oluranti Doherty, Director, Export, Development at African Export-Import Bank (Afreximbank), stated that Afreximbank is willing to tackle the issue of bankable projects, with a special focus on renewable and sustainable projects. "We just need to take the first step and start investment in de-risking projects," she affirmed.
Meanwhile, Hiroshi Matano, Executive Vice President, and Multilateral Investment Guarantee Agency (MIGA), stated that the sustainability of finance over the past two years boomed significantly. Last year, it increased by 63% and reached $5.2trn, which consists of $2.7trn of private equity funds, $1.5trn for green bonds, and $400bn of social bonds.
In the same vein, Matano stressed the need for double embedding; this includes embedding climate change strategies into industrial development strategies.
He also asserted the need of an international consortium to help developing countries, particularly African countries, to develop a pipeline of bankable projects.
For his part, Asian Infrastructure Investment Bank (AIIB)'s chief economist Erik Berglof, stated that there should be more discussions around the availability and access to technology, not just finance, because green transformation is essentially about making sure that all the new technologies are available for developing economies.
During the second panel, Vice-President for Private Sector, Infrastructure and Industrialization at the African Development Bank (AfDB), Solomon Quaynor, said that the infrastructure in Africa suffers from a financing gap that ranges between $60bn and $210bn.
"This is why we created 'Africa 50' along with regional member countries, including Egypt, to reduce risks in infrastructure projects and create an enabling environment," Quaynor explained.
Meanwhile, Hanan Morsi, Deputy Executive Secretary and Chief Economist at the United Nations Economic Commission for Africa (UNECA), stated that it is important to harmonize the investment and regulatory framework to enable Africa to attract a variety of investments. "The continent is suffering the most in terms of loss and damages. On an annual basis, countries suffer from loss and damages, with losses that are up to 2 to 5% of GDP," Morsi added.