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Climate Challenge: Connecting Domestic Savings to Climate

Summary report written by Vivek Pathak, Regional Chief Risk Officer (APAC), IFC

3 June 2024 -  A few years ago, I was on a flight from Venice to Frankfurt. The person beside me, who seemed like a wealthy pensioner, struck up conversation. On hearing that I worked in the climate change sector, she perked up and said the city of Venice needs to be saved from the dangers of climate change. I asked if she would invest her pension into climate projects in emerging markets—and got a resounding “no”.

Changing such perceptions is a key challenge: Emerging markets are struggling to raise capital to finance important sectors that will drive change. These include energy transitions, the decarbonisation of hard-to-abate sectors, and the agricultural value 

For countries to be successful in transitioning to a low carbon growth trajectory, the focus must be on Small- and Medium-sized Enterprises (SMEs), who play a critical role in shaping any economy. However, the likelihood of institutional investors financing SMEs in emerging markets is low, and it is clear we need another source of capital. 

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