The International Monetary Fund logo is seen inside its headquarters
Reducing global greenhouse gas (GHG) emissions to net zero by 2050 requires substantial investment in low-emissions technologies such as renewable energy, the IMF said in its flagship Global Financial Stability Report (GFSR).
The report cited the International Energy Agency’s estimation of the climate action investments needed in developing countries and emerging markets by 2030 that may reach about $2 trillion per year, representing around 40 percent of global investment needs.
“The private sector will have to play a key role in financing climate action investments in emerging markets and developing economies, given a limited fiscal space amid the challenging market conditions,” said the report.
The report added that the IMF’s estimates suggest that the private finance share must rise significantly by 2030, covering about 80 percent of the climate investment needs in these countries.
“Excluding China, the global private financing share is even higher — about 90 percent,” the report highlighted.
It also noted that as more than half of global GHG emissions come from major emerging markets, they need significant mitigation investments; however, developing economies allocate less than 15 percent to global GHG emissions.
“They have fewer mitigation investment needs, but less access to global markets and less ability to attract private capital, as their finance and capital markets are less developed,” according to the report.
Although climate-related investments are globally increasing year on year, they are still limited, the report noted.
Egypt’s government, as part of its vision for 2030, plans to raise the green investments share to 50 percent of the total public investments of the current FY2023/2024.
The government also approved in August the creation of the National Council for Green Hydrogen for stimulating green investment, as part of the country's plan to promote sustainable social and economic development.
“Despite a proliferation of supportive financial sector policies and climate commitments by financial institutions, a substantive shift in financing flows from high- to low-emissions assets, in particular in emerging markets and developing economies, has not been materialized yet,” the report explained.
Around 40 percent of the emerging markets and nearly all developing countries’ economies do not reach an investment-grade rating or have no rating at all, so most large institutional investors do not invest in these countries, according to the report.
Moody’s downgraded Egypt’s credit rating in October amid the country’s debt crisis.