Present at COP30, the UN climate conference, held in Belém (PA), in November, the team from the risk rating agency Fitch identified important lessons for emerging countries, particularly with regard to attracting external capital for sustainable projects and investments. At least five of these “ideas” have been listed. The document is signed by Paula Carvalho, of Sustainable Fitch, and Deborah Siqueira, of the Fitch Ratings team.
According to the report, during the climate conference, participants highlighted the desire to allocate resources to sustainable investments in emerging countries. However, one lesson is that there are significant obstacles preventing the mobilization of capital for climate action and biodiversity conservation, such as, for example, disparities in the cost of capital, currency volatility and “gaps” in project structuring capacity. The company also undermined market confidence, such as lack of standardization, political instability and transparency.
“Success in emerging markets requires innovation, technical expertise and strong partnerships with local stakeholders. Multilateral development banks and development financial institutions play a fundamental role in providing guarantees and credibility, thereby helping to reduce transaction risks,” the agency underlines in the report.
Fitch notes that the financial sector is still struggling to adapt to this type of financing – in the context of sustainable projects, because its credit products generally require interest.
Therefore, development banks and development finance institutions have played an important role in creating and testing scalable and replicable structures, such as hybrid risk-sharing mechanisms (blended finance), guarantees and results-oriented instruments, to make businesses viable.
“However, it is essential to move beyond highly personalized transactions, project-specific solutions and long incubation periods to achieve scale and generate meaningful impact,” he emphasizes.
The blended finance mechanism itself was highlighted as one of the trends highlighted by the COP, precisely because it is an innovative solution for mobilizing capital for emerging markets. Fitch cites as an example Eco Invest Brasil, a Brazilian government program based on a blended financing structure aimed at reducing risks for the financial sector, particularly the private sector, in order to direct resources towards forest restoration, environmental conservation and other topics related to the bioeconomy.
This is a successful case precisely because it addresses the obstacles already mentioned. “By combining public, private and concessional resources in de-risking instruments and guarantee mechanisms, the program offers attractive returns for market participants, while demonstrating that it is viable to have sustainable investments to achieve national decarbonization and sustainability objectives,” he emphasizes.
Private credit is also identified as a relevant means of attracting capital, as investors seek diversification in high interest rate environments such as those seen around the world today. “Private credit is uniquely positioned to drive sustainable transformation, prioritizing transition solutions over conventional divestment strategies,” the authors say.
However, they point out that the market for the sale of company shares (shares in the case of public companies) in emerging countries is still in full maturity and cite, in the case of the Brazilian market, the rise of the agri-food sectors, real estate debt and infrastructure debentures, in addition to dedicated ESG funds. “There is room for expansion,” they say.
The challenges lie in transparency and reporting, which can be addressed by adhering to sustainability disclosure standards.
Financing the transition, particularly for emissions-intensive sectors, is the third important topic discussed at COP30, according to Fitch. The advancement of taxonomies including transition activities towards a greener economy can help to boost this segment and become a good opportunity for emerging countries. But they pay attention to the need for a “super taxonomy”, which can enable interoperability between the taxonomies of different countries, investors and beneficiaries.
Finally, Paula Carvalho and Deborah Siqueira also highlight other lessons from COP30: nature and biodiversity have been consolidated as a central objective for emerging markets; and social dimensions have been integrated into central climate discussions.
“Maintaining standing forests is now seen as an investment proposition that can provide economic value to landowners and those who preserve biodiversity over time,” they point out. They remember, however, that financial architecture – specifically asset guarantees and insurance products – is designed for shorter horizons than those required by projects such as forestry, creating a mismatch between risk appetite and “green timelines”.
Financial innovations, such as Amazon bond issuance guidelines, can help understand how to unlock investment for these regions, like the Amazon. The Tropical Forests Forever Fund (TFFF), much talked about at COP30, was cited as an initiative to overcome these obstacles.
In the social domain, the just transition has entered the agenda once and for all, with the COP leaving a clear message that the just transition must guide mitigation, adaptation and responses to loss and damage caused by extreme climate events. The authors caution that, generally speaking, financial sector solutions exclude this dimension from their discussions of financing. “Advancing inclusive climate finance requires innovative risk assessment and underwriting approaches that recognize the diversity of land systems and community governance, enabling access to capital without imposing impractical requirements,” he emphasizes.
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