The OPEC Fund @COP27

Photo: OPEC Fund

The early morning sun rises imperceptibly over the Sinai Desert on the final day of the UN climate change conference in Egypt; a warm breeze ebbs and flows over the harbor sands while ships pass by the port of Sharm El-Sheikh – colloquially known as “Bay of the Wise”. 

Passing through security at the UN conference center, I am briefly face-to-shoulder with US climate envoy John Kerry, who turns stoically away in a jet-black facemask en route to another negotiation. To my left, German Foreign Minister Annalena Baerbock leads her entourage at pace in a pale green suit, determination incarnate. As at every UN climate conference, many thousands of participants, from grassroots activists to the global elite, take a few joint steps forward before passing the baton on “to all tomorrow’s parties”. 

This year, the OPEC Fund for International Development was part of that process, hosting major events with ministers, experts and heads of global agencies. The multilateral development institution announced groundbreaking climate finance facilities and instruments and held a multitude of panel sessions exploring climate investments, energy transition, sustainable infrastructure, clean cooking, food security, water and sanitation, and the role of the private sector. Here follows a daily account of the OPEC Fund’s main activities at COP27. 

November 9 - Spurring a multi-billion-dollar partnership 

The highlight for the OPEC Fund at COP27 was a joint public commitment with the Arab Coordination Group (ACG) to provide a cumulative US$24 billion in financing by 2030 to address the global climate crisis. Unveiling the package, OPEC Fund Director-General Dr. Abdulhamid Alkhalifa was adamant: “The time for action is now.” 

The ACG package, backed by a majority of the group’s member institutions, will “support the acceleration of the energy transition, the increased resilience of food, transport, water and urban systems, and the promotion of energy security in countries including the least developed countries and small island developing states,” the group said in a press release. 

The OPEC Fund spearheaded the initiative with the adoption of its Climate Action Plan in September 2022 with the goal of increasing climate finance to 40 percent of all new financing by 2030. In parallel, the streamlining of climate finance will allow the Fund to deepen its impact and effectiveness. 

Sitting on a high-level panel beside the Chairman of the Islamic Development Bank Group Muhammad Al Jasser and Egypt’s Minister of International Cooperation Rania Al- Mashat, Dr. Alkhalifa said: “Addressing climate change is urgent, but we must do it in a way that is compatible with combating energy poverty. Our key premise is that climate action and development must be integrated.” 

Thereafter, the OPEC Fund’s Senior Director for Strategic Planning and Economic Services Al Shaimaa Al-Sheiby presented the Climate Finance and Energy Innovation Hub with partners from the UN Capital Development Fund (UNCDF) and Sustainable Energy for All (SEforALL). Outlining the OPEC Fund’s ambitions she said: “For every 1 dollar we invest, we aim to raise 4 dollars from other sources.” Kick-started with US$100 million from the OPEC Fund, the hub will promote clean cooking to address energy needs and climate concerns. 

November 10 - Paving the way to sustainable infrastructure 

The OPEC Fund’s panel session on sustainable infrastructure gave Ms. Al-Sheiby the opportunity to discuss ways to mobilize resources with partner organizations such as the Asian Infrastructure Investment Bank (AIIB), National Bank of Egypt (NBE) and the Multilateral Cooperation Center for Development Finance (MCDF). Ms. Al-Sheiby identified three main challenges: • Financing, with the OECD predicting the infrastructure investment gap to reach US$15 trillion by 2040, • Timing, with the need to plan for generations in advance, and • Sustainability, with the need to accommodate conflicting interests. 

In the discussion, AIIB Senior Investment Operations Specialist Francisco José Fortuny Carod presented a joint project in Nepal, where the AIIB and OPEC Fund are partnering in the Upper Trishuli-1 Hydropower Project with a capacity of 216 MW for a total cost of US$650 million. Hesham Elsafty, NBE Group head, shared his bank’s experience in providing long-term infrastructure loans to small and medium-size investors, while Ede Ijjasz, MCDF senior advisor, showcased the center’s work with the example of a road development program in Laos. Participants agreed that infrastructure development faces serious obstacles and that one solution would be more engagement to accelerate development of better and more cost-effective projects. 

November 11 - Cooking up a clean, green future 

Averting climate change is about more than converting power plants; it also involves upgrading millions of cookstoves. During a panel on clean cooking in Africa, Ms. Al-Sheiby, set out the challenge: “In Africa alone, 2.4 billion people still use cooking fuels such as biomass, coal or wood, which are detrimental to their health and the environment.” 

The consequences are grave: indoor air pollution from traditional cooking fuels causes millions of deaths every year, according to SEforALL, represented at the discussion by head of Clean Cooking Access Mikael Melin. The estimated cost worldwide is US$2.4 trillion, the organization says. Despite the growing realization of the scale of the task at hand, funding remains far behind actual needs. 

The OPEC Fund teamed up with SEforALL and the UNCDF to create the climate hub that will launch a clean cooking pilot project in Madagascar, the island nation in the Indian Ocean heavily affected by rapid deforestation. As Ms. Al-Sheiby told the audience, the OPEC Fund aims to accelerate the deployment of clean cooking solutions to maximize impact by: • Providing households with improved clean cookstoves using solar energy, ethanol, biogas and LPG, • Improving health conditions of rural population, • Decreasing biomass fuel consumption, • Preserving biodiversity and decreasing CO2 emissions, • Investing in reforestation and ecotourism, and • Increasing agricultural revenue. 

Clean cooking also has another dimension, as underlined by Jide Okeke of the United Nations Development Programme: “In many communities, the burden of household duties disproportionately falls on women. As a result, it is women who pay the highest social and health cost of the lack of access to clean cooking.” The introduction of clean cooking alternatives is set to unlock opportunities for women and strengthen their societal and economic position. 

November 12 - Filling the hole in food security 

Global concerns about food security were explored in a panel including OPEC Fund Public Sector Director for MENA, Eastern Europe and Central Asia Musab Alomar. Setting out a roadmap for how multilateral development institutions can deepen their impact, he said: “Our joint efforts cannot be conducted in isolation. The international development community must base its approach on 3 Cs – coordination, cooperation and communication.” 

Reaching out and working together with partner countries will allow us to identify activities that are both flexible and durable. “Flexible enough to adjust to changing conditions and priorities, while durable enough to support partner countries and clients in their development efforts,” added Mr. Alomar. 

The war in Ukraine has severely disrupted supply routes and, according to UN estimates, around 50 million people in 45 countries are living on the edge of famine. The situation is all the more serious as food insecurity had already been rising since 2018 with the impacts of climate change causing more and more damage. Low-income countries are most severely affected and tackling food security will cost about US$50 billion, says the International Monetary Fund. 

The OPEC Fund responded with a US$1 billion Food Security Action Plan adopted in June 2022, which was quickly amplified by a US$10 billion Arab Coordination Group facility. The plans address both immediate emergencies and long-term needs as demonstrated by a first US$100 million loan to Jordan, signed in October. 

The Jordan loan exemplifies, in a nutshell, how the food action plan works: it combines short-term goals such as the financing of much-needed supplies with long-term goals such as reducing import dependency. At the same time, the OPEC Fund is acting as a member of a bigger group: The Islamic Development Bank and the European Bank for Reconstruction and Development have joined the effort and increased the size of the facility to almost US$500 million. 

November 14 - Financing flows to water and sanitation 

Challenges and opportunities for water and sanitation, including financing and infrastructure development, was the focus of a further panel session featuring Mr. Alomar, who said that “global costs to achieve SDG 6 exceed US$1 trillion per year, or 1.21 percent of global GDP. Yet, financing flows remain well below needs.” 

Representatives from Argentina and the Maldives provided insights with reports from the ground. In Argentina, the OPEC Fund has extended more than US$210 million for projects securing supply in two provinces. In the Maldives, the OPEC Fund is the single biggest investor in the sector with more than US$125 million to date. In addition, it also helped countries build their policies, which in turn enabled other institutions and investors to more readily enter the sector. 

Representing a Small Island Developing State, lying barely a meter above sea level, Maldives Minister of State for Environment, Climate Change and Technology Khadeeja Naseem made an impassioned plea for the international community to meet the 1.5°C Paris climate commitment. She added that protecting investments on projects like desalination facilities while also focusing on nature-based solutions such as mangroves will make a positive impact in a country so particularly vulnerable to climate change. 

Speaking on the situation in Argentina, Cordoba Province Minister of Public Services Fabián López shared his scenario planning for varying degrees of climate change and spoke of the importance of bi-provincial aqueducts for the semi-arid region that he represents. 

November 15 - Cooperating for Egypt’s energy upgrade 

How to provide energy in an affordable, equitable and sustainable way was central to this panel, which featured Mohamed Abdel Gawad Allam, head of Multilateral Cooperation with the UN and IFIs at Egypt’s Ministry of International Cooperation, who presented the host country’s program entitled, Nexus of Water, Food and Energy (NWFE). 

The NWFE program was announced in July 2022 to attract foreign funds to implement green projects in the water, food and energy sectors. The US$10 billion program, which will be funded through grants, soft financing and private sector investments, includes replacing 17 natural gas-based power stations with up to 10 gigawatts of renewable energy from wind and solar. Mr. Allam said: “We don’t need more pledges; we just need to work on the points already in the plan.” 

Husain Mugaibel, Islamic Development Bank Global Lead Energy Specialist, said the huge scale of energy investments required to cope with accelerating demand and major investments means that addressing them will only be possible with private sector involvement. For that, governments must lead the way on de-risking. 

That view was shared by OPEC Fund Private Sector Business Development Director Khalid Khadduri: “Egypt has shown how through multi-stakeholder engagement the potential for renewable energy becomes a reality.” He noted that the Egyptian government had pursued energy diversification and liberalization, facilitating a market for private renewable energy development. 

The OPEC Fund was also represented on the panel by Mr. Alomar, who said, “Working with other members of the Arab Coordination Group more than 40 percent of OPEC Fund support to Egypt has gone to the energy sector and increasingly towards energy transition.” The added value of the ACG, for Mohammed Sadeqi, engineering advisor at the Kuwait Fund for Arab Economic Development, is that the group enables the collective financing of very large projects, which would otherwise be impossible to achieve alone. Mr. Sadeqi said that ACG members “agree that the best way to deal with climate change is to collaborate on securing a clean environment for new generations.” 

November 17 - Acclimatizing the private sector 

The countries of the Middle East and North Africa are central to discussions about global energy security and transition. With pledges to support climate action with multibillion-dollar investment programs, the region is also attracting the attention of the private sector, the topic of the OPEC Fund’s final panel at COP27. 

Co-hosted by the IsDB, the panel included the OPEC Fund's Assistant Director-General, Private Sector & Trade Finance Operations, Tareq Alnassar, who cited a range of renewable energy projects co-financed by the OPEC Fund in Jordan and Egypt. “If the right incentives are in place for investors and they have sufficient confidence that their investment will generate a decent return, the private sector can actually be mobilized,” said Mr. Alnassar. He emphasized that multilateral development banks have the capacity to move beyond debt financing and can play a major role in risk-sharing or derisking investments, such as by providing green trade finance for climate and sustainable trade products. 

His views were shared by the IsDB’s Senior Climate Change Specialist Habib Abubakar, who named private sector investments as the missing link for tapping the region’s renewable energy potential. “The Middle East is critically positioned to lead the net zero transition. The region is blessed with abundant solar energy which can be exported to other parts of the world which lack sufficient electricity supply.” 

The OPEC Fund’s Private Sector Business Development Director Khalid Khadduri laid out various successful approaches that have transformed the renewables sectors in Jordan and Egypt. “Methods such as ’scaling’ – combining multiple smaller projects into one financing agreement – can be replicated in other countries. We then need innovative approaches, for example to manage local currency risks in energy projects with cooperation of all actors including governments, the private sector and MDBs.” He underlined that “South-South cooperation, for example in transfer of technology and intra-regional investment flows, can help accelerate MENA’s energy transition.” 

Afreximbank’s Senior Manager Youssef Beshay spoke about the green bond markets in Africa and MENA as emerging instruments to finance the green transition. He explained that demand is huge from global investors for green bonds. However, the market in the MENA region is moving slowly and only two percent of globally issued green bonds are issued in Africa: “The main reason for that is the lack of clear incentives for issuing green bonds vs conventional bonds. With market access and standardization, this can change.” 

Closing the discussion, Hiba Ahmed, Director-General of the Islamic Solidarity Fund for Development, emphasized the role that the private sector can play as a financier and partner throughout project lifecycles: “As former finance minister of Sudan, I know that the private sector has an ever-increasing role not only in financing projects but also implementing, capacity building and even in monitoring and evaluation. It is clear that without the cooperation of all actors we cannot succeed.” 

Sharm El-Sheikh in Sum 

Beyond the numerous panel events and climate commitments made with UN and international partners, the OPEC Fund also joined high-level roundtables on food security and the Middle East Green Initiative; signed agreements with Saudi Arabia and the African Development Bank; and held meetings with the Asian Infrastructure Investment Bank and the New Development Bank. 

OPEC Fund Director-General Dr. Abdulhamid Alkhalifa gave an interview to Bloomberg’s Arabic-language news service, Asharq Business, in which he called on the world’s major emitters of greenhouse gases “to do more to help achieve a just and inclusive energy transition, including helping developing countries access climate finance.” With the nascent “Loss and Damage Fund” agreed in extra time at COP27, that breakthrough seems closer than ever – although the real work will likely begin next year at COP28 in Dubai.