The Ministry of Climate Change and Environment (MoCCAE) today announced at COP28 the ‘Financing the Future of Food (F3)’ initiative to explore innovative bond structures supported by the World Bank Treasury that will help de-risk private sector capital and transform food and agricultural systems in the Global South.
The Ministry also announced a new bond program it developed, which is being supported and tested by the World Bank and Pegasus Capital, with due diligence currently underway. A formal announcement of the bond is expected in the first half of 2024.
The Ministry has been championing the F3 initiative since COP27 and is now partnering with the World Bank Treasury to develop a range of innovative bonds with the objective of increasing institutional investor financing to support transformative investments within developing countries.
To develop the framework, the Ministry and World Bank Treasury worked with Citi, Chanya Impact, Abu Dhabi Fund for Development and ADX (Abu Dhabi Securities Exchange), where a dual listing is planned.
Announcing the details at the ‘Forum on Turbocharging Sustainable Finance and Capital Markets in MEA’, Mariam bint Mohammed Almheiri, Minister of Climate Change and the Environment, said
F3 will demonstrate that alternative forms of financing are possible to accelerate climate finance, without placing additional burdens on Government financing.
“One of the top priorities of the COP28 Presidency is to build a framework for financing a new climate economy to make finance available, accessible, and affordable,”
“And at COP 28, the UAE and our partners are going beyond words and pledges into actual commitments.”
Almheiri said to build on the momentum and to meet the US$4 trillion per year required to meet the world’s Net Zero goals, it is important to leverage the knowledge, resources and strengths of all partners – governments, the private sector, multilateral entities, and philanthropists.
“By utilising the F3 structure, investors and project developers can do more and go further with their investments, ultimately creating more impact, confident that they have a degree of capital protection to their investments.”
The bonds will permit investors to direct their financing to specific sets of projects with a portion of the return on the bonds contingent on the success of those projects. They place no additional burden on countries where the investments are being made, require no sovereign guarantees, ensure project developers are engaged, align incentives for all parties to do better when the projects succeed, and can be combined with other forms of blended finance at the project level.
F3 will create collateral pools to provide coverage for impact investors, allowing them to do more and go further. All participants will share in the risks and rewards of the projects they finance, and first-loss provisions will be carried out by the investor. The projects targeted are high-impact ones that address the UN Sustainable Development Goals and must generate economic returns as well as impact in addition to being in developing countries where access to finance is harder.
At the Forum, several innovative sustainable finance initiatives were launched including a new Climate Finance Center to be set up at Abu Dhabi Global Market (ADGM) to scale up green financing; the Dubai International Financial Center (DIFC) Sustainable Climate Catalyst, which incentivises and accelerates green capital markets through technical assistance and incentives programs; the carbon coalition and blended finance facility by UICCA (UAE Independent Climate Change Accelerators) to accelerate green financing in the region; and the harmonisation of green sukuk guidance by ICMA (International Capital Market Association).
Several finance commitments were made at COP28 including a $30 billion commitment to the newly launched catalytic climate vehicle. The UAE also pledged a contribution of $100 million of new finance for nature-climate projects and $200 million to help climate resilience in vulnerable countries, which follows up from a previous pledge of $200 million to support development in low-income countries earlier this year in Marrakech.
News Source: Emirates News Agency