British International Investment (BII), the UK’s development finance institution and impact investor, is set to announce new investments and partnerships aimed at climate finance mobilization across West Africa and other emerging markets at COP29. BII’s initiatives target increased private capital flow into renewable projects in regions particularly vulnerable to climate change. Among these upcoming announcements are a landmark investment in India’s renewable energy sector in collaboration with other Development Finance Institutions (DFIs) and private investors, as well as a new blended finance facility in West Africa. This facility is intended to attract local currency funding from private investors, specifically for renewable energy projects like mini-grids.

These moves follow BII’s recent launch of initiatives designed to reduce financial risk for private investors in emerging markets, including a new concessional capital facility to support social or green bond issuances. From 2021 to 2023, BII successfully mobilized $1.12 billion in private capital for climate finance initiatives.

The need for such measures arises from a common hesitation among private investors who control substantial assets to invest in emerging markets due to concerns about risks such as currency volatility, political instability, and regulatory challenges. Recent data from the International Finance Corporation (IFC) and the European Investment Bank (EIB) challenges these perceptions, showing that default rates in developing countries are lower than anticipated. DFIs like BII are positioned to mitigate these risks, as they can commit long-term capital with lower expected returns and leverage extensive insights into the economic environments of the countries where they invest. This unique positioning allows them to engage private investors more confidently in these markets.

According to BII’s Chief Executive Designate, Leslie Maasdorp, DFIs are working to create safer and more attractive opportunities for private investors to address significant financing gaps in climate action. The United Nations Conference on Trade and Development (UNCTAD) estimates that emerging economies require $3.3 to $4.5 trillion annually to meet Sustainable Development Goals (SDGs), leaving a $2.5 trillion gap under current financing levels. Of the estimated $600 billion in private capital needed annually to fund a green transition, more than half must be stimulated by DFIs, Multilateral Development Banks (MDBs), and other bilateral financial institutions. BII’s approach aims to bridge this gap by addressing the risks that deter private investors, ultimately directing more capital into essential climate projects.