Q&A: Adis Dzebo on private finance for climate adaptation in developing countries

Q: What can you tell us about the seminar?
AD: The overall theme was how to make climate finance more effective for developing countries. My colleague Aaron Atteridge gave an overview of the issues around effectiveness of climate finance and broader development finance, and proposed some ideas for bringing these two finance streams into better alignment, followed by a dialogue.

After lunch a few of us gave brief presentations to kick off a panel discussion. Jan Cedergren, a board member of the Green Climate Fund, talked about the role of funds like the GCF in financing adaptation, and what the GCF hopes to do differently. Tove Goldmann from the Swedish Ministry for Foreign Affairs, who was previously at the Swedish International Development Cooperation Agency (Sida), talked about the role of Sweden in providing climate and development finance to vulnerable countries, including LDCs and SIDS.

Q: What role do you see private finance playing in climate adaptation by LDCs and SIDS?
AD: I wanted to highlight that a lot of people are putting their faith in private finance – particularly international private finance streams like foreign direct investment and debt – to finance climate adaptation in LDCs and SIDS, but this faith is likely misplaced. In reality, very little private finance is flowing to these countries, and much of what there is, is concentrated to a few countries’ extractive industries. In terms of its overall effect, international private finance can just as easily be negative – contributing to climate maladaptation – as positive.

In addition, I highlighted recent research from Jesse Griffiths of Eurodad showing that financial resources are flowing out of developing countries at almost twice the rate that new financial resources are flowing in. In LDCs, outflows amounted to 18% of GDP in 2011. I think some of the ambassadors were quite shocked by this.

I suggested that instead of relying on international private finance, LDCs and SIDS need to focus on mobilizing revenue from domestic private finance, through measures such as tax collection, supporting domestic SMEs, reducing transaction costs for remittances, microfinance, and promoting the domestic insurance industry. There is a role for international public finance in helping to mobilize the domestic private sectors in LDCs and SIDS.

Q: Will you be doing more research in this area?
AD: Yes, under the SEI Initiative on Climate Finance. One of the work streams under the initiative looks at the limits and opportunities of private climate finance. It will focus specifically on how enabling environments, mobilization and delivery mechanisms can contribute to scaling up domestic and international private finance for climate change activities in developing countries. This work will also include two case study countries, one least-developed country and one middle-income country.

Learn more about the SEI Initiative on Climate Finance »