Administrator Samantha Power at COP28 Mobilizing and Localizing Climate Finance Event

ADMINISTRATOR SAMANTHA POWER: Thank you, Gillian, for your extraordinary leadership at USAID and in the world. Decades from now, generations from now, we will remember this period in our government, as a whole, as an inflection point as President Biden likes to say, and it’s because of people like you and your team integrating this agenda, as you said, across all sectors of development. 

Thank you to our panelists. I can’t wait to hear the extraordinary group of people that we have gathered today, and thanks to the amazing leaders who are here, who are at the vanguard of figuring out how to surge climate finance to the developing economies that need it most. 

As you all know this isn’t just the million dollar question; it is the $2 trillion question. 

That is roughly the level of financing that developing and emerging economies, excluding China, need every year by 2030 to meet their climate goals – to adapt infrastructure and food systems that serve 3.6 billion people, to help communities recover from worsening disasters, to build clean energy that allows them to keep developing their economies without surpassing our global emissions goals. 

For us at development agencies like USAID, that $2 trillion of need forces a real reckoning, a genuine reckoning. If we were to take all of the official development assistance and finance coming from every nation on the planet and redirect it just toward climate action – which of course we would never be able to do given the multitude of other challenges that we face – that would meet only a sixth of the total need that is out there. There is simply no way to meet the climate finance need without a sharp increase in private sector investment. 

So you may be expecting me to spend my time today stressing the reasons why it is vital for the private sector to step up – to save lives, to avoid mass displacement, to accept historic responsibility, to prevent historic instability, and to prevent the worst effects of climate change from falling on those who did the least to cause the problem in the first place. We’ve all been at events like that and heard arguments of that nature, which are very valid. 

But at USAID, and I’m sure at any of the institutions where you work, what we hear again and again from private sector partners and entrepreneurs is that actually they don’t really need to be convinced that these investments are essential, they pretty much get that already. What they need is for us to help make these investments practically possible. That is a really, really important distinction.

Eighty-eight percent of developing countries, and all but three African countries, have credit ratings so low that many formal investors simply can not take on the risk. Many of the climate investments we need are in new and innovative solutions – which are, of course, by definition risky by their very nature. In other words, it’s not a lack of will per se that is keeping climate investment from flowing to emerging markets. It is this prohibitive level of risk. 

So here at USAID, we are increasing our focus on helping private investors manage the risks that come with investing in emerging markets and in new inherently risky solutions. 

Today, I am thrilled to announce that early next year, the Green Guarantee Company – the first privately guaranteed company devoted to green bonds and loans in developing countries – will officially launch. Because providing investment grade guarantees vastly increases the number of investors that can support these projects, the U.S. government’s $10 million in seed funding is expected to help the Green Guarantee Company catalyze $1 billion in new investment to least developed countries for climate adaptation and mitigation. 

By using again what is a relatively small amount of public dollars, we can help harness the scale and sophistication of the private sector and crowd in more mainstream flows of private finance to developing markets. 

At the same time, we are helping to nurture emerging solutions, particularly from local leaders, through the risky early stages – to help build a pipeline of proven, investable projects to take on climate challenges. 

For instance, one major challenge that most of you are familiar with leaves Africa’s smallholder farmers vulnerable to climate shock, and that is that many are not covered by insurance – in part because it is very, very tough to run an insurance business in remote places, where inspecting damage in the wake of a climate emergency is hugely expensive, and both the premiums and potential payouts are comparatively small. That means that when disasters come, farmers often have to do things like sell their vital livestock or harvest crops before they are ready. This of course can be incredibly destructive to their long-term earning potential.

So a few months ago at the UN General Assembly, as part of USAID’s Adaptation Finance Window, we made a call to insurance companies to come up with proposals for promising solutions. We got dozens of responses, no surprise there. And today, I am happy to announce the first three of five grants that we will be giving to insurance technology companies Floodbase, Blue Marble, and WTW to help them develop their proposed solutions. 

Floodbase, for example, is working with another USAID grantee called Africa Risk Capital Limited to provide flood insurance to farmers in Mozambique and Malawi. They are assessing the damage not by physical inspections, which are time consuming and costly, but using satellite flood tracking data to assess water flows. That helps get farmers quick payouts so their livelihoods are not destroyed after floods. Floodbase’s analysis found that if its program had been in place during Cyclone Idai in March of 2019, more than 10,000 farmers in the central regions of Mozambique could have received up to a $100 cash payout within days of the event – helping them avoid acute food insecurity, and replant and rebuild. 

Because Floodbase doesn’t rely on physical infrastructure to do its work, once they have proven their solution is working in Mozambique and Malawi, the hope is that they can draw in private investors to quickly scale across Africa.

Through investments like these, we will build the pipeline of investable solutions that can draw in more private investment – and help get investors and entrepreneurs in the 80 countries we work with the tools they need to access and direct investment.

After all, it is local communities that know best. They know best how to prepare their communities for the impacts of climate change. For that reason, we’ve been championing the Principles on Locally Led Adaptation – and we are prioritizing solutions that come from local organizations and indigenous and youth leaders who are most attuned to their communities’ needs. 

The bottom line is this in closing: we need private investment to generate finance on the scale we need. And we need public investment to get that finance to flow to the communities that need it most. I’m really eager to hear more from all our partners on how we can work together to meet this critical moment and to take advantage of thai inflection point. 

Thank you so much.