COP29 is nearing its conclusion. Activists on the frontline of climate action – people defending and supporting the world’s poorest and most climate-vulnerable communities – have been rightfully raising their voices. Amongst other things, many vigorously assert that profit has no place in climate finance. After all, why should people in the rich world make a buck out of fronting up what we morally owe to the least responsible for the mess we originated?

I agree. But only to a point.

Profiteering is inexcusable, but profit is necessary. Particularly to unleash the incredible potential of pioneering, socially-orientated, small and medium-sized enterprises (SMEs) bringing solar energy and clean cooking to communities in sub-Saharan Africa. Ashden is proud to support these innovators. They are, and will continue to be, at the forefront of Africa’s green electrification revolution. I’ll come back to this; let’s look at the macro picture first.

The main business of COP29 is to agree a New Collective Quantified Goal (NCQG) for the total climate finance that should flow from the Global North to the Global South. Lots of amounts are being spotlit, ranging from $1.3 trillion a year to over $6 trillion. Note that there are about 1.3 billion people in the group of countries classed as developed in the COP process and ostensibly responsible for supplying this finance; if solely fulfilled in grants, these NCQG proposals would translate to between £1,000 and £5,000 per person in this group of countries, per annum, for many years to come.

The politics of asking taxpayers in the North to rise to that challenge near-term would be toxic. For example, by some estimates, up to 2 million people in the UK may at times have to choose between eating and heating this winter. There is little appetite for more tax hikes.

Yes, we can and must raise our existing tax-funded assistance as much as possible. We can (I would say must) apply global solidarity levies, e.g. global taxes on wealth, shipping, frequent flying and financial transactions. International institutions like the World Bank, created to meet the challenges of postwar Europe, should be reformed. Reforms should result in greater voice, grants and concessionary lending to low and middle income countries. And the case is strong for newly rich countries, such as the Gulf petrostates, to step up too.

Even so, it’s impossible to see how foot the bill without the private sector being the major player. As well as being used directly to meet pressing needs such as adaptation and resilience, taxpayers’ money must therefore be used to leverage much larger private finance flows, including by underwriting loans and investment.

This is actually a super-smart thing to do. Take energy, the great enabler. Access to energy boosts business, trade, agriculture, education, sanitation – you name it. Read this and take a deep breath: almost 600 million Africans have no access to electricity. That’s way, way more then the total population of the EU. And little Belgium has almost as much solar power capacity as the whole of sub-Saharan Africa, with a faster solar growth rate. That is simply not acceptable.

Renewable energy SMEs will be central to remediating this. Affordable loans and patient, profit-making investment in these enterprises will enable them to be viable and succeed, thus creating jobs, increasing livelihoods and building wealth within their communities. In turn, this will grow cash and savings, which will be the bedrock of expanding new, local financing, increasing Africa’s control over its own destiny. Wouldn’t it be a good thing if our pension funds were to switch out of investing in the old, dirty economies and invested instead in dynamic, new, green economies?

But there’s another serious obstacle, obscured by the scale of the NCQG: how to disaggregate these trillions of dollars into the smaller ticket sizes SME innovators need. Many are caught in the gap between successful set up and being investor ready. For example, they need affordable loans but, in places like Nigeria where IMF lending conditions require 100% collateral, loans are out of reach to young SMES. And those ready for investment are often too small to access it – traditional investors either don’t get out of bed for smaller ticket sizes or don’t understand these SMESs and local markets well enough to sensibly assess risk and hence offer realistic terms.

The following may not be news, but its therefore about time governments and the finance sector listened to and learned from clean energy (and other) SME innovators; that multilaterals prioritised the innovators; and that investors worked harder to get to know the innovators. Donors should also be more intentional in helping to build locally-owned financial institutions with the flexibility and products to meet the needs of SME innovators.

All of this can be done right now, whatever the new NCQG.  Driven by mutual gain, within a non-negotiable context of fairness and partnership, it would be transformative. We just need the determination to get on with it.

Ashden is committed to seeking out, supporting and showcasing truly fantastic clean energy innovators (and other climate pioneers) to politicians, decision makers and investors. To partner with us as we create impact, contact our business development team.