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    • Rwanda: As part of Rwanda’s plan to close a billion climate finance gap
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    Rwanda: As part of Rwanda’s plan to close a $6 billion climate finance gap

    Umito Posted on

    Rwanda is exploring innovative approaches to mobilize $6.2 billion in climate finance, from 2024 to 2030, as part of the rapid implementation of the new climate and nature financing strategy.

    Innovative climate finance mechanisms and private sector investment approaches were discussed on November 14, 2024, at the 29th United Nations Climate Change Conference (COP29), where Rwanda unveiled its national climate finance strategy. climate and nature.

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    The overall cost of implementing Rwanda’s Nationally Determined Contributions (NDCs), which are the Rwandan government’s national climate action plans, since 2020 is estimated at $11 billion and the funding gap current is estimated at more than 6 billion dollars.

    Teddy Mugabo, CEO of the Rwanda Green Fund, said Rwanda would begin implementing the new strategy by operationalizing the green taxonomy, coordinating capacity building and adopting innovative financial mechanisms as well as financial risk reduction.

    “By 2030, Rwanda aims to mobilize $6.2 billion to finance climate biodiversity initiatives across the country,” she said during a speech at COP29 in Azerbaijan .

    Mugabo said this funding is necessary to address the effects of climate change given that Rwanda loses over $300 million every year, citing the example of the years 2022 and 2023.

    Rwanda has set ambitious targets to achieve carbon neutrality by 2050 while promoting biodiversity conservation and sustainable economic development and the strategy is seen as a model for mobilizing the financial resources needed to achieve these targets.

    ALSO READ: Rwanda faces a $7 billion funding gap to implement its climate action plan

    “We want to improve resource mobilization, diversify financing sources and financial mechanisms, and become a sustainable financial platform,” she said.

    According to the Ministry of Finance and Economic Planning (MINECOFIN), the strategy will help mobilize national and international resources to address the twin crises of climate change and biodiversity loss, as well as exploit new economic opportunities which will make it possible to respond to these crises.

    The strategy aims to significantly increase financial flows for climate and nature projects by leveraging a mix of public, private and international funding sources.

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    The climate finance mechanism that Rwanda relies on includes innovative instruments such as green bonds, carbon markets and blended finance, among others.

    Green bonds

    Green bonds, which are part of the instruments for mobilizing climate finance, are a type of debt in which, by issuing this type of bonds, a company – private or public – receives funds or money raised from investors to exclusively finance projects with a positive impact. environmental impact, such as renewable energy and green buildings.

    ALSO READ: Rwanda needs $13 billion to boost green transport sector

    Carbon markets

    The carbon market is another form of mobilizing climate finance through carbon credits where countries or companies finance green projects around the planet that reduce carbon emissions and use the credits generated by these projects to offset their own emissions.

    ALSO READ: Rwanda enters into tripartite agreement to cooperate on carbon credit projects under Article 6

    Countries participating in the annual United Nations climate summit (COP29) taking place Monday, November 11 in Baku, Azerbaijan, achieved a breakthrough by agreeing on the rules for a global carbon market administered by the Nations United Nations which would finance projects aimed at reducing greenhouse gas emissions.

    The development is expected to set the benchmark for emissions trading, unlocking billions of dollars in financing for emissions mitigation projects in developing countries.

    Biodiversity credits

    Biodiversity credits, another instrument used by Rwanda to mobilize climate finance, are an economic instrument that allows private companies to finance activities, such as forest conservation or restoration, that generate net biodiversity gains .

    This is an innovative approach to channeling private investments towards biodiversity.

    Mixed financing

    Among the innovative approaches to mobilizing climate finance, blended financing includes debt, credit enhancement such as sub-debt, duration extension (remaining time before the expiration of a financial contract) and collateral support for commercially viable projects in the green sector.

    Credit enhancement is a strategy to improve a company’s credit risk profile, usually to obtain better debt repayment terms.

    Blended concessional financing is designed to address the issues of high risk and low potential profitability encountered in many private sector projects in fragile states by offering below-market terms of financing and risk mitigation products.

    Experts emphasized that blended finance can help reduce risks that would otherwise make investing impossible or unaffordable.

    Mugabo highlighted Ireme Invest, which was launched at COP27, as a blended finance mechanism using a blended finance approach that Rwanda established to provide alternative financing.

    “So far we have been able to raise $260 million and have already deployed a percentage of that,” she noted.

    Public-private partnerships

    Rwanda’s private sector is expected to play a key role in achieving the strategy’s objectives through public-private partnerships (PPPs), incentives for sustainable investments and the creation of green jobs in key sectors such as agriculture , energy and infrastructure.

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    A key objective of the strategy is to promote nature-based solutions, including ecosystem restoration, sustainable land use and conservation initiatives.