Until a few years ago, very few international development and cooperation agencies systemically dealt with issues such as adaptation to climate change, decarbonisation, circular economy and biodiversity. Words like natural capitalism, renewable energies and circular regeneration were never spoken. Decarbonisation and biodiversity protection were minor points of cooperation between agencies or NGOs. Energy security or risk protection were rarely discussed in bilateral or multilateral processes.

Today, however, things have changed. In agencies like USAID, Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) and Agenzia Italiana per la Cooperazione allo Sviluppo (AICS), climate and environmental issues have gained the upper hand.

USAID, for example, is focused on mitigating climate change and addressing its impacts by partnering with more than 45 countries to implement ambitious emission reduction measures, protect critical ecosystems, transition to renewable energy, build resilience against the impact of climate change, and promote the flow of capital toward climate-positive investments.

The German GIZ has invested heavily in its “Green Recovery” programmes, aimed at a post-pandemic economic recovery in Least Developed Countries (LDCs), based on green principles. It facilitates change that is sustainable, resilient and climate-neutral.

In Italy too, environmental and climate issues have become central at every level, from decentralised cooperation to governmental and multilateral cooperation. Coopera 2022, the National Conference of Development Cooperation, which took place in July in Rome, reflected the centrality of the topic: “Decarbonisation goals are still achievable, but the ecological transition cannot be made without breaking down global inequalities”, said the Minister for Ecological Transition Roberto Cingolani during the event.

To better understand the role development cooperation plays in emerging green markets and why this should interest European companies, we discussed this opportunity with Minister Plenipotentiary Alessandro Modiano, Italy’s first Special Envoy for Climate Change. His role, similar to that of US Climate Envoy John Kerry, is to be the reference point for all international climate change policies. As a special envoy, he will carry out an important liaison role between the Ministry of Foreign Affairs and International Cooperation and the Ministry for Ecological Transition.

The discussion started with an understanding of the position of LDCs and developing countries. “Today, we know that the 20 richest countries on the planet generate 80% of GDP and 80% of greenhouse gases. The least developed countries are therefore those that pollute the least: they emit very limited amounts of CO2 and consequently contribute very little to global warming”, explains Alessandro Modiano. “At the same time, they are paying the highest price for global warming. This is why we should remember that the best way to protect these countries from the pernicious effects of climate change is to act on the decarbonisation of G20 countries, on large industrial economies. Developing countries can, however, still play a role in decarbonisation, and it is our responsibility to help them reach carbon neutrality. Furthermore, there is a critical area of intervention in the least developed and vulnerable countries, where cooperation plays a central role: climate change adaptation, which is very urgent in many African countries, coastal states and small islands”.

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There is an abundance of multi-level tools to sustain environmental projects in developing countries. Bilateral agreements between a developed country and a developing one are the most common. “Today, Italy has over 50 green bilateral cooperation projects involving many beneficiaries. These projects are based on a set of priorities defined by the Paris Agreement and all the international environmental and climate protocols and pacts”, explains Modiano. “While bilateral cooperation slowed during the pandemic, this year we decided to boost it again. These are key instruments in promoting technology transfer and Italian know-how, especially in key sectors like renewable energy, circular technologies and so on. We favour bilateral cooperation projects, as they provide visibility and acknowledgment to our country”.

In contrast, multilateral cooperation involves a multiplicity of donors that enact programmes through multilateral organisations, like UNICEF and FAO, or development financial institutions, like the International Monetary Fund (IMF). “Multilateral instruments allow us to reach complex geographical areas (author’s note: including conflict areas), where these organisations have an established track record, long-term presence and ability to operate”, explains the climate envoy. “President Draghi himself said several times, last year at the G20 and at COP26 in Glasgow, that multilateral development banks will play a key role in securing climate finance for adaptation and mitigation”.

To achieve climate and biodiversity goals, however, we can’t just rely on public money and ODA (Official Development Assistance). Private investment, including infrastructure finance through public-private partnership (PPP) models, is essential for the delivery of climate-smart infrastructure. Given the massive capital requirements and need for innovation (both in terms of technological solutions and funding structures), PPPs potentially provide a useful framework within which the public and private sectors can pool and coordinate their financial and technological resources more efficiently.

“In Italy, we have already used instruments like blending and matching quite a lot. But the real leap in quality will take place with the Climate Fund proposed by the Italian prime minister”, explains Modiano. The world has promised to disburse USD 100 billion a year to developing countries under the Paris Agreement, but that target has not yet been reached. In order to bridge the gap, Mario Draghi has announced a drastic increase in the resources that will be available to our country in these areas, tripling its financial commitment to EUR 840 million per year for the next five years. Other European countries have done the same: France has pledged up to EUR 7 billion, Spain EUR 1.35 billion and Sweden EUR 1.5 billion.

“The Climate Fund is based on soft loan and export credit. EUR 800 million will be disbursed as loans and EUR 40 million as grants. This tool, to be activated at the end of 2022, is centred on PPPs, and is thus aimed at involving private partners and employing financial blending strategies. Furthermore, export credit (author’s note: delivered via SACE, the Italian Export Credit Agency) provides loans that allow us to mitigate risks for any private company wishing to invest in developing countries: this is a way to encourage private sector involvement”.

The Climate Fund will be presented in winter at a public event and with a website. “We want to involve large enterprises and SMEs. There are plenty of opportunities for Italian and European joint ventures. Not just for climate, but also on biodiversity and other environmental areas”, concludes Modiano. “We hope to create the right partnership to deliver great results, together”.

An article by Emanuele Bompan