2025 Public Sector Perspectives

Jorge Ordonez Public Sector Banking, Sovereign Solutions and Advisory Climate Finance: What Financial Tools are Available to Sovereigns? T he results of the First Global Stocktake, the most comprehensive assessment of the world’s progress on climate action to date, indicates that there have been improvements. However, the world is not on track to achieve its long-term targets under the Paris Agreement. Implementation of the current nationally determined contributions (NDCs) puts global temperature rising at 2.1-2.8 ° C above pre- industrial levels, higher than the Paris target of “well below 2 ° C”. 1 Countries are expected to submit the next round of NDCs in 2025, and increased ambition is paramount to achieve the 2 ° C target (and especially to reach the preferred 1.5 ° C target). Much will depend on available financing to support climate change mitigation and adaptation investments, especially in emerging markets and developing countries (EMDCs). The Independent High-Level Expert Group on Climate Finance determined that there is an incremental financing gap in EMDCs of $1.8 trillion per year by 2030 to meet the Paris Agreement and related development goals. 2 Some of this gap is expected to be filled by the New Collective Quantified Goal, which will replace the $100 billion pledge made by developed countries in 2009 to mobilize climate finance for EMDCs. However, funding ambitious and decisive climate action will only be possible through higher rates of private capital mobilization and the utilization of financial market instruments at scale. Some financial instruments specifically addressing climate and development are available to sovereigns today, albeit at different stages of maturity and varying degrees of replicability. 1 UNFCCC https://unfccc.int/topics/global-stocktake/about-the-global-stocktake/outcome-of-the-first-global-stocktake 2 Second report of the Independent High-Level Expert Group on Climate Finance, 2023. Citi Perspectives for the Public Sector 19