Author: Jide Olutoke

COP27 which was tagged an African COP had the highest number of participants so far in the history of COP. Participants ranging from Negotiators, Parties, Observers, Government officers, and private sector players are all duly represented. However, there is little or no presence of private sector players within Africa including banks, insurance companies, asset managers, and other trade associations. Given the importance of the private sector in the attainment of the Paris Alignment and the impact Climate change will have on Africa and other developing countries, I find it extremely odd that the owner of capital did not deem it fit to infuse themselves into the conversation.

According to the report of the independent high-level expert group on climate finance, emerging markets and developing countries other than China will need to spend around $1 trillion per year by 2025, and around half of the required financing can be reasonably expected to come from local sources. This report further highlights the role of the private sector in domestic resource mobilization and project execution.

I have highlighted below a few reasons why domestic investors are key to climate goals

• Domestic investors face less credit adequacy restriction compared to cross-border investors. domestic investors who are not exposed to exchange rate risk and country risk tend to build more resilience compared to their foreign counterparts
• Countries without effective capital inflow sterilizing mechanisms might find themselves dealing with high inflation, currency appreciation, and an undermined domestic export due to huge reliance on cross-border investors.
• Heavy reliance on cross-border investors exposes the country to huge global risk: Increased interest rate in the US means an increase in the cost of borrowing from the international market. The increased interest rate tends to affect renewables more than the fossil fuel industry because renewables are Capex-heavy.
• Domestic investors create systemic impact: Achieving Net Zero has the potential to destroy existing jobs and domestic investments are better equipped to create new ones.
• Information Cost: The combination of local information and global expertise leads to higher profits

It is high time that private investors including banks, asset managers, and pension funds within the continent come together to drive domestic mobilization. While it is commendable that Glasgow Financial Alliance for Net Zero (GFANZ) – a global coalition of leading financial institutions committed to accelerating the decarbonization of the economy- recently launched its African network, I am looking forward to seeing the domestic players leading conversations.  I was disappointed when I looked around the pavilions and booths at COP27 and none of it was devoted to the financial market players in Africa. It is also interesting that right in the middle of COP 27, a leading bank in Nigeria announced a funding stream for oil exploration and export. Combating climate change is a global action and we need everyone as a stakeholder and participant, not a spectator.

I would like to express my heartfelt gratitude to Duke University for providing the platform and the funding to participate in COP 27.  COP 27 in Sharm El Sheikh is my first COP, and I will highlight some of the few takeaways from the event.

There is a general realization that there must be an urgent need for climate action. While there is a possibility that the audience in COP is all climate enthusiasts leading to a self-selection bias, the atmosphere at COP shows that there is great enthusiasm among all stakeholders including countries, Multilateral organizations, private sector actors, indigenous communities, and young people. The conversation is being steered towards implementations and actions rather than just highlighting the problem. While I could not compare this COP to the previous COP because I am a first timer, the feedback from COP veterans is that there is increased private-sector participation. Given that financing is one of the biggest challenges to achieving climate goals, there seem to be a lot more actions and commitments from the private sector and owners of funds. Emphasis is placed on solutions rather than problems. Indonesia just got a $ 20 billion deal to decarbonize its energy sector and there is also a possibility that other coal-dependent countries might get some version of that to fast-track the decarbonization process.

COP has also provided me the opportunity to network with people that I believe are critical to my career trajectory. I am currently working with a climate investment advisory firm for my master’s project, and I have been able to source critical stakeholders and resources for my research. For those in their second year looking to attend COP, I will advise that you try and figure out your thesis early enough before going to COP.

COP 27 is a big event with different agendas and as an attendee, you must have a clear definition of what you are looking to achieve. Negotiations are the critical piece of this class and to ensure that you get the best value from those negotiations as an observer, you should get the source documents for those negotiations before attending. The amount of jargon being used in the negotiation rooms could be discouraging, it is therefore important that you have at least a basic idea of what you the session is all about before attending. Whatsoever topic you intend to track in COP please get some of the notes and agreements from the previous COP.

Lastly as a student either seeking an internship or a full-time role in the climate space, there is an opportunity to network. COP is a social leveller that brings you into proximity to top CEOs, heads of organizations, and heads of businesses. Attend some of the side events, ask good questions, and provide feedback on some of the issues that were raised on the panel. Remember to always reference Duke University in your conversation, it provides more access than you can ever think of.

If you are reading this, you are either considering applying for the UNFCCC class or you are on your way to COP, one thing I could say is that COP is a life-changing event, and I am grateful Duke provided me the opportunity to attend.

Fourteen months ago, I resigned from my job to pursue a graduate degree in Public Policy, while the choice of Public Policy is based on my interest in international development, I did not particularly figure out what aspect of international development I will be focusing on. Combining my Investment Banking knowledge with the frustration of Energy Access in Nigeria, I decided that I will focus on improving Energy Access in Sub Sahara Africa.  It became clear that as we are aiming to solve the issue of energy poverty, the traditional approach of using fossil fuel, coal, and other non-renewable would not sustain Nigeria and all other developing countries that are still dealing with energy poverty in the long run. Providing enough renewable energy sources is largely reliant on financial resources which are not available in many developing countries.

My expectation in COP 27 is inextricably linked to the success and failures of COP 26. The successes include creating a private network of financial institutions and creating a methane reduction mandate. Failures include the inability to scale finance flows beyond $100B and the inability to properly address the extent of irreparable damage that is happening in many developing and small island nations. I am hoping that this year’s COP will see a better commitment and action to mobilize the private sector into climate investment. I am looking forward to increasing pressure on restructuring DFI and MDBs funds into blended finance instruments to leverage private finance.  I am also hoping that financial services through the GFANZ network and other similar networks could create and develop country-level finance strategies to strengthen the NDC action of their host countries. Secondly, I am looking forward to seeing that adaptation and damages are not just confined to NGOs and Philanthropic organizations. I am quite happy that Egypt has decided to include Loss and Damage in this year’s agenda and that means that issues around the anthropogenic factors leading to climate change can be discussed and possibly paid for. I am hoping that COP 27 will offer a paradigm shift in how we see climate change across the world. On a personal note, I am looking forward to connecting with organizations, individuals, and agencies committed to climate change and sustainable development in general.

Financing for climate has always been driven by Multilateral Development Banks and Development Finance Institutions, I am hoping that this year’s COP will provide a genuine commitment to a fair equitable, and just energy transition. Just Energy Transition Partnership also known as JETPs is an $8.5b financial package that was offered to South Africa last year to transition from coal, this has led to similar calls by other coal-dependent nations like India, Indonesia, and Vietnam. While this is commendable, countries will low coal and fossil usage have seen their voices increasingly drawn and quietened in the crowd. I hope this year’s COP will also provide opportunities for Small Island Nations and smaller countries to seek commitment to their energy transition goals.