G20 ministers spotlight $400m Emerging Markets Transition Debt scheme

Source: G20.org/Diogo Zacarias/MF. Brasil’s Finance Minister Fernando Haddad and US Treasury Secretary Janet Yellen during the signing of a landmark climate partnership agreement during the G20 Finance Track ministerial meeting in Rio de Janeiro.

Their sentiment underscores the progress of the Emerging Markets Transition Debt (EMTD) initiative, where investors are committed to a $400m investment in the energy transition in emerging markets.

This fund, supported by Investor Leadership Network members, Legal and General Investment Management, and Wiltshire Pension Fund, will target clean infrastructure, technology, and decarbonisation projects.

For many of the investors involved, the participation in this initiative would represent a new step forward aimed at helping to close the important financing gap in the decarbonisation of emerging and developing economies.

The purpose of the EMTD initiative is to provide companies in emerging markets with commercial financing to make critical investments, including in low-emission infrastructure and in heavy emitting companies with a credible transition plan—helping reduce carbon emissions and supporting the global energy transition.

This approach is consistent with the goals of the Partnership for Global Infrastructure and Investment (PGII), an initiative that President Biden and G7 leaders launched in 2022.

A great victory for Brazilian diplomacy!��Check out the statement by Brasil’s Finance Minister Fernando Haddad on the meetings of #G20 Finance ministers and deputy finance ministers that took place this week in Rio de Janeiro. #G20Brazil #G20Brasil pic.twitter.com/2gvt4yKgrS

— G20 Brasil (@g20org) July 26, 2024

The Bellagio Consortium was launched in Paris by Secretary Yellen as a partnership between the US Treasury and the Investor Leadership Network – with the support of The Rockefeller Foundation - to undertake a variety of work aimed at increasing institutional investors' climate- and development-aligned investment in emerging markets over the coming years.

Significant progress has been made since the launch in 2023. At Cop28 in Dubai, the Consortium and the ILN announced a key partnership with the United States Trade and Development Agency (USTDA) to provide $100m through a technical assistance funding window to help prepare projects in key emerging markets for investment.

During the 2024 Spring Meetings of the World Bank and International Monetary Fund, the ILN, The Rockefeller Foundation, and the US Treasury co-hosted a first-of-its-kind forum for chief investment- and chief risk officers from institutional investment groups. The forum aimed to address barriers to investing in emerging markets and developing countries to finance critical climate projects.

Advancing Treasury priorities

Responding to this new initiative, Janet Yellen, United States Secretary of the Treasury, said it advances key Treasury priorities.

"Since the start of the Biden-Harris Administration, the Treasury has actively worked to promote economic growth, stability, and resilience globally, including helping countries accelerate their energy transitions and achieve their climate goals.

“To support these goals, President Biden and G7 leaders launched the Partnership for Global Infrastructure and Investment, through which we are driving investment flows into critical sectors that advance inclusive and sustainable growth and combat climate change around the world.

"As part of PGII, we have been working with investors like those in the ILN to find ways to increase climate- and development-aligned investments in emerging markets, leading to this new initiative.

“We are optimistic that all these efforts will lead an increasing number of investors to explore new opportunities in emerging markets, driving economic growth and dynamism.”

“Institutional investors have a leadership role to play in the transition, and finance opportunities like the EMTD fund can provide a solution by focusing on private sector investments," commented Marc-André Blanchard, ILN co-chair and executive vice-president and head of CDPQ Global and Global Head of Sustainability, CDPQ.

"Aligned with our goal to deploy constructive capital to decarbonise the global economy, this initiative – alongside the US Treasury and ILN – demonstrates CDPQ’s desire to actively participate in the energy transition and to have an enduring impact.”

Building energy momentum

Hendrik du Toit, ILN co-chair and founder and chief executive of Ninety One adds: “We are grateful to Secretary Yellen for her support as well as the investors who have anchored the strategy, including ILN members, CDPQ and OMERS and UK investors, LGIM and Wiltshire Pension Fund.

“Momentum is building for the emerging market energy transition, and while there are real risks that need to be addressed in these markets, the perception of risk is much higher than realised risks historically. So far institutional investors’ investment in emerging markets has been largely focused on public-listed equities and sovereign debt.

"However, much of the investment in the energy transition – particularly in middle-income emerging markets – is required in the form of private equity, private debt, project debt and corporate debt.

"The Emerging Market Transition Debt initiative is a mechanism to both allocate capital to the emerging market energy transition and to catalyse further such investment.

"We believe that this is a crucial opportunity to have significant real-world impact for both climate and development goals. A successful global energy transition is not possible without a successful emerging markets transition.”

Celebrating strategic milestones

“We are excited to stand here alongside Secretary Yellen, Minister Godongwana and our partners to celebrate this important milestone of progress for the Bellagio Private Capital Mobilization Consortium,” said Amy Hepburn, chief executive officer of the Investor Leadership Network.

“This milestone underscores that the right kinds of public-private partnerships, built to be focused on building trust among parties, learning from each other, and seeking new ways to look at old problems, can break down barriers that once seemed insurmountable.

"We are looking forward to continued progress from ILN members and Consortium, especially as we look toward our Global Investor Forum later this year in Cape Town, South Africa.”

To help vulnerable populations and combat the climate crisis, it's crucial to invest institutional capital in emerging markets and developing countries, said Rajiv J. Shah, president of The Rockefeller Foundation.

"This initiative is proof of what’s possible when diverse partners come together to unlock private capital for critical energy transition, climate resilience, and other investments in the developing world.

"The Rockefeller Foundation is proud to help advance this effort, which began with a convening at our Bellagio Center, to bring power—and progress—to those without electricity access."