New strategy aims to unlock private investment for climate action in developing countries
An international development bank plans to buy green energy loans in poorer nations using public funds, aiming to draw trillions from the private sector to support climate goals.
Fiona Harvey reports for The Guardian.
In short:
- Avinash Persaud, an adviser to the Inter-American Development Bank (IADB), has developed a plan to boost climate finance by having development banks purchase performing renewable energy loans in developing countries, freeing up capital for new projects.
- These loans, though relatively low-risk, often sit idle because credit rules prevent private institutions like pension funds from investing in them due to the lower credit ratings of poorer nations.
- By securitizing and backing these loans with public institutions that have high credit ratings, the plan creates a “virtuous circle” that could generate tens of billions in investment and accelerate renewable energy growth in the global south.
Key quote:
“This could be an engine for green growth, and produce the trillions needed for climate finance in the future.”
— Avinash Persaud, special adviser on climate change to the president of the Inter-American Development Bank
Why this matters:
Poorer nations face a dual burden: They are among the most vulnerable to the climate crisis, and they frequently lack the resources to invest in clean energy or build resilience. While wealthy countries pledged $1.3 trillion in annual climate finance by 2035, funding remains slow and fragmented. Public guarantees for green loans could lead to a shift, unlocking large-scale private investment while using existing capital more effectively. The plan banks on the idea that repackaging existing renewable loans will not only reduce risk but also mobilize new projects.
Related: Europe relies on North African renewables while local communities face costs
