IMF highlights need for $5 trillion in annual green investments by 2030

The International Monetary Fund (IMF) has stressed the pressing need for a substantial surge in green investments to effectively tackle climate change. In a recent blog post, IMF economists Simon Black, Florence Jaumotte, and Prasad Ananthakrishnan emphasized that annual green investments need to skyrocket from $900 billion in 2020 to $5 trillion by 2030 to realize net-zero emissions by mid-century. This call to action comes as the world anticipates the forthcoming COP28 summit in Dubai.

The IMF pinpointed that emerging and developing countries (EMDEs) are especially in need of financial backing, necessitating $2 trillion annually in green investments—a considerable leap from current figures. The private sector is anticipated to play a crucial role, with predictions suggesting it could furnish up to 90% of this funding due to limited public resources.

Present global policies, as per the IMF, are inadequate in meeting the Paris Agreement benchmarks aimed at alleviating climate change. Although existing technologies could implement more than four-fifths of the necessary emission reductions, attaining net-zero also hinges on innovations that are still under development or have yet to be created.

The IMF’s focus on investment aligns with India’s ambitious climate objectives, known as the “Panchamrit” pledge, which aims for net-zero emissions by 2070. Ahead of COP28, India’s Finance Minister Nirmala Sitharaman has emphasized the importance of definitive actions on climate finance and technology transfer. She particularly underscored the need for clear guidance on funding mechanisms and technological advancements to effectively combat climate change.

A decrease in patent filings for eco-friendly technologies since a peak in 2010 adds another dimension to the challenge, signifying a deceleration in innovation precisely when speed-up is required. The IMF’s blog serves as a timely reminder of the financial and technological commitments necessary to address the climate crisis, as global leaders and policymakers prepare for crucial negotiations in Dubai.

The IMF also highlighted investment hurdles like foreign exchange volatility and immature capital markets, calling for policy reforms to facilitate private investments in sustainable projects within EMDEs.

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