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Diokno underscores importance of mobilizing blended finance to scale up climate action at COP28 climate talks

DUBAI, UNITED ARAB EMIRATES––Finance Secretary Benjamin E. Diokno has underscored the importance of mobilizing blended finance to scale up climate action during a series of events at the 2023 United Nations Climate Change Conference (COP28) Finance Day on December 4, 2023 in Dubai, United Arab Emirates (UAE).

In a high-level roundtable organized by the UAE government, finance ministers gathered to share their country’s efforts to reform the international climate finance structure and explore ways to unify initiatives through a shared vision.

“Innovative sources of financing are needed to augment the increasing financing costs associated with climate action,” Secretary Diokno said during his intervention at the High-Level Roundtable on How to Scale up Financial Resources and Implement Enabling Policies for Climate Action.

Scaling up climate finance, especially in developing countries like the Philippines, is essential to achieving the objectives of the Paris Agreement––the international treaty on climate change.

Under the Agreement, Parties are called to implement efforts to limit the global average temperature increase to below 2°C above pre-industrial levels and limit the temperature increase to 1.5°C above pre-industrial levels.

The Philippines, through its Nationally Determined Contribution (NDC), has committed to a projected greenhouse gas (GHG) emissions reduction and avoidance of 75 percent for the period 2020 to 2030 for the sectors of agriculture, waste, industry, transport, and energy.

According to a report that was jointly commissioned by the Government of the United Kingdom and the Government of Egypt, developing countries would need US$ 2 trillion annually in climate funding by 2030.

Secretary Diokno identified three key elements to effectively scale up sustainable and climate finance: 1) the full alignment of financing and investments with national climate plans and development agenda; 2) the systematic allocation of financial resources; and 3) the mobilization of the private sector in funding climate-smart infrastructure.

In this effort, he shared that the Philippine government has put in place reforms to improve the public-private partnership (PPP) policy environment in the country, such as the recent passage of the PPP Code, to pave the way for high-quality, cost-effective, and climate-resilient infrastructure projects.

Secretary Diokno specifically detailed the Marcos, Jr. administration’s massive Build Better More Program during his intervention at the Blended Finance Session, which tackled efforts to mobilize private investment in climate adaptation.

Nordic Development Fund Managing Director Karin Isaksson and Caisse de dépôt et placement du Québec (CDPQ) Executive Vice President and Global Head of Sustainability Marc-Andre Blanchard joined him during the panel discussion. Joan M. Larrea, Chief Executive Officer of Convergence moderated the session.

According to the Finance Chief, the Philippine government is committed to investing in 197 high-impact Infrastructure Flagship Projects (IFPs), amounting to about PHP 8.7 trillion or US$ 155 billion. These include climate-resilient infrastructure projects that will be financed through various sources, including PPPs.

Further recognizing the private sector’s role in advancing the country’s climate ambition, Secretary Diokno also shared that the Philippines has opened key sectors of the economy to foreign investments, citing that full foreign ownership is now possible for the renewable energy sector. Additionally, the government is also offering attractive incentives for the development of the electric vehicles industry.

Aside from these, the Finance Chief noted that it is the responsibility of every government to put its fiscal house in order to create fiscal space for climate change-related programs, highlighting that the Philippines achieved this through its first-ever Medium-Term Fiscal Framework (MTFF) for 2023 to 2028.

The MTFF is the country’s first-ever fiscal consolidation plan to achieve macro-fiscal stability without sacrificing economic growth.

He added that finance ministers should be part of the conversation in charting the New Collective Quantified Goal (NCQG) on Climate Finance to help scale up the quantity while improving the quality of climate finance.

Later that day, Secretary Diokno shared the Department of Finance (DOF)’s strategy to strengthen climate finance in the Philippines during a ministerial meeting organized by the Coalition of Finance Ministers for Climate Action (CFMCA).

The meeting brought together finance ministers to share the impact of the policies they have implemented in terms of unlocking investment opportunities and mobilizing climate finance.

During the discussion, Secretary Diokno highlighted the Philippines’ MTFF and emphasized that it works in harmony with the Climate Change Expenditure Tagging (CCET) which tracks, monitors, and reports programs that help address and alleviate problems posed by climate change.

For Fiscal Year 2023, the Department of Budget and Management (DBM) has tagged PHP 453.11 billion for climate change adaptation and mitigation in the National Expenditure Program (NEP).

Aside from the recently passed PPP code, the Philippines launched its Sustainable Finance Framework in 2022 to attract sustainable investments in the country. The Framework sets out how the Philippines intends to raise Green, Social or Sustainability Bonds, Loans, and other debt instruments in the international capital markets.

The Sustainable Finance Taxonomy Guidelines are also being developed by financial regulatory agencies in the Philippines to filter investments that are environmentally or socially sustainable, thereby encouraging private sector investments towards climate change adaptation and mitigation initiatives.

“Ministers of Finance must therefore leverage the public sector’s ability to influence financing and investment opportunities, as well as the private sector’s comparative advantage on financial capital and technological innovation,” Secretary Diokno said.

In closing, he emphasized that financing climate action should not be viewed as a competing priority, but as an indispensable part of economic growth and development.