COVER STORY
Growth in climate finance needs to increase five-fold by 2030 to meet the Paris Agreement goals The first graph shows that a dramatic increase in annual climate finance is needed to meet the 1.5°C goal by 2030. The second graph highlights that current adaptation flows need to increase nearly 200% to meet 2024-2030 adaptation needs in emerging markets and developing economies (EMDEs) alone.
institutions can join in this A-loan via a parallel loan structure. In addition, commercial parties – impact investors or institutional investors – are invited to participate via the B-loan structure. This has a catalyst effect, building a network of investors with credible asset solutions in developing countries. IFIs have been doing business in this standardized way for the last 50 years, basically raising loans for developing countries, so they have a large pool of these good investments on their balance sheets. Now the intermediaries are coming into the picture and saying: If you have a balance sheet of US$10 billion, including US$2 billion of loan syndications with credible private sector companies in sub-Saharan Africa, why not pass this on to us and take it off your balance sheet? This is a good example of how you can find practical bottom-up solutions for projects in sub-Saharan Africa, which improve the local financial system through innovative policies. OFQ : How else can IFIs make a difference? AB: Our laboratory is also investigating the obstacles, best practices and how knowledge is shared, including operational insights into how the allocation of capital enables innovation and sustainable development. I’ve also started research into global public goods, particularly knowledge, which can help fill the abovementioned gaps. There’s more than half a century’s worth of knowledge concentrated in IFIs, which needs to be quantified, standardized and disseminated. Developing countries need this knowledge, particularly the 44 UN- designated Least Developed Countries. Local financial capabilities are weak in these countries. Practical examples from IFIs include data and analysis on
8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0% US$ billion
US$ billion 300
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Annual needs through 2030 under 1.5°C Annual climate finance
EMDE adaptation finance needs Global adaptation finance flows
* 2023 value estimate between US$1.5 and US$1.6 trillion
Source: Climate Policy Initiative, IIF
OPEC Fund Quarterly : This summer you founded the International Economics and Development Laboratory at the University of Athens. What will be the main focus? Anthony Bartzokas: I was elected Professor of Development Economics at the University of Athens in September 2024 and set up a new laboratory the following July to create the opportunity for researchers to investigate the real-life trends and challenges of sustainable development and the potential of financial innovation. Our starting point is to look beyond the funding gaps in sustainable development. Everybody’s talking about the missing trillions, but too few people are talking about what needs to be done on the ground. So we’re trying to build a bridge between policy-relevant research and
OFQ : What case studies can you already point to? AB: Consider what the banking sector is already doing for investment in sustainable development. Here’s one example of an “A/B loan”: Say you’re the CEO of a mining company in Africa and you need US$100 million for a major expansion. The local financial market can’t provide that kind of money, so you contact the African Development Bank (AfDB), which is a trusted partner to a large network of collaborating banks. Every now and then these banks share new opportunities for funding, for which you then apply. You do your due diligence and establish yourself as a credible partner. But still you’re based in sub-Saharan Africa, so private sector investors and other institutional investors remain hesitant. Recognizing that it’s a difficult
what happens in the field. My personal conviction is that: (a) economics is never an end in itself, but always a means to the end of contributing to the better allocation of scarce resources and (b) policy engagement is never a substitute for clarity, rigor and intellectual honesty.
environment, the AfDB takes on the riskier A component. Other development finance
“It’s important to bring in the central banks of developing countries. To not include them is a missed opportunity.”
Anthony Bartzokas, Professor of Development Economics, University of Athens
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