Rwanda is exploring innovative approaches to mobilise $6.2 billion climate finance, from 2024 to 2030, as part of implementing the newly adopted Climate and Nature Finance Strategy at speed. The innovative climate finance mechanisms and private sector approaches to investment were discussed on November 14, 2024, at the 29th United Nations Climate Change Conference (COP29) where Rwanda unveiled its National Climate and Nature Finance Strategy. ALSO READ: COP29: What is Rwanda's main agenda in Baku? The overall cost of implementing Rwanda's Nationally Determined Contributions (NDCs), which are national climate action plans by the government of Rwanda, since 2020, is estimated at $11 billion and the current financing gap is estimated at over $6 billion. Teddy Mugabo, the CEO of Rwanda Green Fund, said Rwanda will start implementing the new strategy by operationalising the green taxonomy, coordinate capacity building, and adopt innovative financial mechanisms as well as financial de-risking. “By 2030, Rwanda aims to secure $6.2 billion to fund climate biodiversity initiatives across the country,” she said while speaking during COP29 in Azerbaijan. Mugabo said this funding is needed to cope with climate change effects given that Rwanda loses over $300 million every year, citing an example of the year of 2022 and 2023. Rwanda has set ambitious goals for achieving carbon neutrality by 2050 while promoting biodiversity conservation and sustainable economic development and the strategy is seen as a blueprint for mobilising the necessary financial resources to realise these objectives. ALSO READ: Rwanda faces $7 billion funding gap to implement climate action plan “We want to enhance resource mobilisation, diversify sources of funding and financial mechanisms, and become a sustainable finance hub,” she said. According to the Ministry of Finance and Economic Planning (MINECOFIN), the strategy will help mobilise both domestic and international resources to tackle the dual crises of climate change and biodiversity loss as well as tap into new economic opportunities that will address these crises. The strategy aims to significantly scale up financial flows for climate and nature projects by leveraging a mix of public, private, and international funding sources. ALSO READ: Rwanda revises green growth strategy The climate finance mechanism that Rwanda is counting on includes innovative instruments such as green bonds, carbon markets, and blended finance, among others. Green bonds Green bonds, which are part of instruments to mobilise climate finance, are a type of debt where by issuing this type of bond, a company — private or public — receives funds or money raised from investors to exclusively finance projects that have a positive environmental impact, such as renewable energy and green buildings. ALSO READ: Rwanda needs $13bn to boost green transport sector Carbon markets Carbon market is another form of climate finance mobilisation through carbon credits where countries or companies finance green projects anywhere on the planet that reduce carbon emissions and use credits generated by those projects to offset their own emissions. ALSO READ: Rwanda enters tripartite deal to cooperate on Article 6 carbon credit projects Countries at the UN annual climate summit (COP29) underway in Baku, Azerbaijan, on Monday, November 11, secured a breakthrough by agreeing on rules for a United Nations-administered global carbon market that would fund projects which seek to reduce greenhouse gas emissions. The development is expected to form the gold standard for emissions trading, unlocking billions in finance for emissions mitigation projects in the developing world. Biodiversity credits Biodiversity credits, another instrument to be used by Rwanda to mobilise climate finance, are an economic instrument that allow private companies to finance activities, such as forest conservation or restoration, that deliver net positive biodiversity gains. It is an innovative approach to channel private investment into biodiversity. Blended finance Blended finance among the innovative climate finance mobilisation approaches includes debt, credit enhancements such as sub debt, tenor (length of time remaining before a financial contract expires) extension and collateral support to commercially viable projects in the green sector. Credit enhancement is a strategy for improving the credit risk profile of a business, usually to obtain better terms for repaying debt. Blended concessional finance is designed to address the issues of high risk and potential low profitability found in many private sector projects in fragile states by offering below-market terms for finance and risk-mitigation products. Blended finance, experts have insisted, can help lessen risks that would otherwise make it impossible or unaffordable to invest. Mugabo pointed to Ireme Invest, which was launched at COP27, as a blended finance facility using blended finance approach that Rwanda has put in place to provide alternative financing. “So far, we have been able to raise $260 million and have already deployed a percentage of that,” she noted. Public-private partnerships Rwanda’s private sector is expected to play a key role in achieving the strategy’s goals through public-private partnerships (PPPs), incentives for sustainable investments, and the creation of green jobs across key sectors like agriculture, energy, and infrastructure. ALSO READ: National budget increases by 11%, climate change among priorities A core focus of the strategy is to promote nature-based solutions, including ecosystem restoration, sustainable land use, and conservation initiatives. These efforts will not only reduce greenhouse gas emissions but also enhance biodiversity, water security, and disaster resilience. Climate finance dedicated department The strategy reinforces Rwanda’s commitment to strengthening the capacity of the Ministry of Finance, by creating a Climate Finance and Green Economy Department, which will play a pivotal role in coordinating climate and nature finance efforts. Recognising the importance of global partnerships, Rwanda will continue to engage with multilateral organizations, development partners, and climate finance mechanisms to support the implementation of the strategy. The strategy’s implementation will be overseen by the Ministry of Finance, with the Climate Finance Department taking the lead in coordinating resource mobilisation and project funding. The private sector, civil society, and international partners are encouraged to collaborate with the government to unlock the full potential of climate and nature finance in Rwanda. Hortense Mudenge, the Chief Strategy Officer at Rwanda Finance Ltd, observed that there was a need for Rwanda to create a conducive environment to mobilise regional and international funding, and that that’s how Kigali International Finance Centre was established. “An enabling environment was needed. Now we need investors and the private sector to tap into the incentives [that we offer through the Kigali international Finance Centre],” she noted.
