The year 2022 marks the 50th anniversary of the United Nations Conference on Human Environment held in Stockholm. With 122 countries attending, it directed a sharp focus on the environment as a vital challenge of our times, perhaps for the first time ever at a gathering of such a size. The ensuing 50 years have been marked by significant advancements in technology. However, the past five decades have also seen the environment face ever–increasing and graver challenges that would have been unimaginable at Stockholm, as a consequence of unsustainable economic growth.
Developing countries are particularly vulnerable to these challenges, arguably more so than developed economies. At the same time, developing countries also need to continue making material progress to improve the standard of living of their citizens. While the technologies that permit environmentally conscious development are available, these are either expensive or needed at a scale that is outside the ability of developing economies to reasonably fund by themselves. So how big a financing challenge do developing countries face, and what can be done to mobilize finance for the technologies of today?
Environmentally conscious finance flows come with many different prefixes, such as green, sustainable or climate, to name just a few. However, whatever the prefix, each results in a positive and beneficial impact on the environment. Nowhere are these flows more apparent than in the low-carbon transition, which is potentially one of the most significant drivers of capital flows in the 21st century. While an estimated USD 100 trillion in investments are necessary to achieve global net-zero greenhouse gas emissions by mid-century, the investment requirements for even less ambitious trajectories still number in the trillions. Much of these investment flows will have to be directed towards developing countries, which will drive the incremental consumption of energy and materials going forward. For example, as per the International Energy Agency (IEA), developing countries are expected to account for 88% of the growth in electricity demand between 2019 and 2040. However, these countries are not evidently well equipped to mobilize the necessary investments on their own.
This paper is part of a series that supports the Stockholm+50: Unlocking a better future report.