Investment in technologies of today: increasing flows of finance into developing countries

The paper argues that developing countries lack the financial sector capacity to fund the scale of investment required for low-carbon transitions. It distinguishes between 'commercially viable technologies' that need scaled-up investment and 'financially underserved technologies' that require de-risking. Proposed solutions include the creation of a Global Clean Investment Risk Mitigation Mechanism (GCI-RMM), the implementation of sustainable taxonomies and corporate disclosures, and the use of carbon pricing. The authors emphasize that multilateral cooperation is essential to harmonize these regulations and increase grant-based concessional finance to catalyze private investment.

• Developing countries face a significant investment gap for sustainable technologies, with some estimates suggesting that achieving India's 2070 net-zero target would require USD 10.1 trillion, leaving a gap of USD 3.5 trillion.
• Sustainable technologies are categorized into two groups: commercially viable technologies, which have attained scale but need more volume to meet long-term targets, and financially underserved technologies, which suffer from high risk perceptions and lack of track records.
• Domestic financial systems in developing countries are often too small or underdeveloped to provide the necessary credit, as evidenced by the correlation where lower income levels correspond to lower domestic credit to the private sector as a percentage of GDP.
• To address the lack of de-risking mechanisms, the paper proposes a Global Clean Investment Risk Mitigation Mechanism (GCI-RMM) based on risk pooling across projects and countries to reduce transaction costs and increase market liquidity.
• Financial and fiscal regulations, including sustainable taxonomies and corporate sustainability disclosures, are identified as tools to reduce greenwashing and link international capital with credible project pipelines in developing countries.
• Carbon pricing is becoming more common in developing economies to penalize negative externalities, with Indonesia recently finalizing a cap-and-trade mechanism and a carbon tax on coal-fired power plants.
• Multilateralism is critical for increasing grant-based concessional finance, which only accounted for 27% of public climate finance support in recent reported figures, to better capitalize catalytic instruments.

APA

Dutt, A., Ghosh, A., & Sidhu, G. (2022). Investment in technologies of today: increasing flows of finance into developing countries. Stockholm Environment Institute. https://www.sei.org/wp-content/uploads/2022/05/investment-technologies-today-stockholm50backgroundpaper.pdf

Chicago

Dutt, Arjun, Arunabha Ghosh, and Gagan Sidhu. Investment in technologies of today: increasing flows of finance into developing countries. Stockholm Environment Institute, 2022. https://www.sei.org/wp-content/uploads/2022/05/investment-technologies-today-stockholm50backgroundpaper.pdf.

Wikipedia

{{cite report |last1=Dutt |first1=Arjun |last2=Ghosh |first2=Arunabha |last3=Sidhu |first3=Gagan |title=Investment in technologies of today: increasing flows of finance into developing countries |publisher=Stockholm Environment Institute |date=May 2022 |url=https://www.sei.org/wp-content/uploads/2022/05/investment-technologies-today-stockholm50backgroundpaper.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{dutt2022investment, author = {Dutt, Arjun and Ghosh, Arunabha and Sidhu, Gagan}, title = {{Investment in technologies of today: increasing flows of finance into developing countries}}, institution = {Stockholm Environment Institute}, year = {2022}, month = may, url = {https://www.sei.org/wp-content/uploads/2022/05/investment-technologies-today-stockholm50backgroundpaper.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }