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Interview with Joanna Pinkas, Assistant Director, Department of Foreign Affairs and Trade (DFAT), Australia

Interview with Joanna Pinkas

Assistant Director, Department of Foreign Affairs and Trade (DFAT)

1. How is DFAT working with the private sector to unlock private climate finance?

 

There are boundless possibilities for the private sector to gain from, and accelerate, the net-zero transition in our region—the Indo-Pacific. DFAT, like PFAN, is working to link up promising businesses to the private investment they need to grow and innovate.

DFAT works directly with the private sector to:

  • support local businesses and projects to become ‘investment ready’
  • support the intermediaries (funds, incubators, accelerators, project preparation facilities etc.) that are the backbone of healthy financial markets
  • use blended finance to catalyse private capital into high-impact sectors and businesses

This engagement with the private sector is a natural complement to our support for governments to create the policy and regulatory environment conducive to private investment. Much of the work we do on the regulatory side is precisely to address market failures, reduce risks for business and investment, and increase development impact—the same goals we have working directly with the private sector.

When it comes to using public funds directly, it’s essential for DFAT to gauge when to step in (address a market failure) and when to stay out (when the private sector would and could do it without us). For us, one of the key ways we manage these issues is to work in the earlier stages of financial investments, well before a DFI or private investors will step in. By working with early-stage project ideas and fund managers (including first time fund managers) we not only stay away from subsidising or competing with private finance, we draw it in, and also get to build in gender, climate and development impact right into the DNA of these nascent initiatives.

Traditionally DFAT’s support has been grant based, we have now built capability to offer more diverse financial products, especially when trying to incentivise private actors into new or more risky investments. We have the flexibility to work across all these spaces – deploying grants as well as debt, equity, guarantees as needed. Our Emerging Markets Impact Investment Fund (EMIIF), the Australian Climate Finance Partnership (ACFP) and our support for the PIDG are all examples of how we are diversifying our products and as a consequence the potential to work with a wider range of partners to achieve the SDGs.

Needless to say, gender equality and women’s economic empowerment is built into all our blended finance initiatives. Capital markets that don’t advance gender equality or capitalise on the contribution of women are both less sustainable and destined to underperform. We cannot afford either.

2. Can you tell us more about DFAT’s support for PFAN, and how this support contributes to DFAT’s overall strategy and priorities on unlocking private finance for climate and clean energy?

 

Along with our neighbours in the Indo-Pacific, Australia is aiming for a net-zero transition that supports inclusive economic growth, resilience and a stable and prosperous region. This can’t happen without private investment and private investment won’t happen without a pipeline of bankable projects.

We support PFAN precisely because it’s directly helping to build that pipeline.

It’s not just what PFAN does that’s important, it’s the way it works that leads to sustainable results. PFAN’s network of local coaches and coordinators combine their country and regional knowledge with PFAN’s global expertise to create fresh innovative solutions grounded in local contexts. We value this approach because it both builds local ecosystems and reduces risks for investors.

DFAT’s funding for PFAN is partly earmarked to building PFAN’s gender impact (discussed further below) and to our region, including Southeast Asia and the Pacific. Two very different regions requiring very different approaches, but both with opportunity:

For example, in Southeast Asia, we have fast-growing economies with a high demand for energy. There is a lot of opportunity to ensure that energy is renewable, affordable and with diversified stable supply chains.

The Pacific is looking to replace their reliance on diesel generators (and the huge drag this has on public finances) with renewables which are more cost-effective, reliable and more suited to the remote and natural hazard environments of island states.

Both these regions present investment opportunity and risks that benefit from PFAN’s support.

3. What are the main features of DFAT’s efforts to promote gender lens investment opportunity in the Indo-Pacific region?

 

We have learnt from our programs like Investing in Women that applying a gender lens makes business and investment sense, as well as gender equality outcomes.

This is why DFAT applies a gender lens to all our blended finance and impact investments. We have high ambitions to embed gender lens investing in the market in the Indo-Pacific—to increase the volume and impact of private capital flowing to the region in support of inclusive economic development and gender equality.

At its core, gender lens investing incorporates gender analysis (of biases, patterns, risks and opportunities) into financial analysis in order to achieve better outcomes. DFAT typically (but not exclusively) breaks this down to the following approaches:

  • Promoting gender equality in the workplace by investing in companies with leading gender policies that also extend across their supply chains.
  • Investing in women owned or led businesses.
  • Increasing the number of products and services that improve the lives of women and girls.

We are seeing early but impressive results and nascent but growing interest from savvy insightful investors.

4. In your opinion, and looking at it from the perspective of being the vice-chair of the PFAN Steering Committee, where do you see the biggest opportunities for PFAN to increase its impact?

 

Gender lens investment as discussed above represents a big opportunity to improve both returns and manage risk – especially in the net zero transition. As investors refine their portfolios to take into account climate risk and the net zero transition, their investments will be stronger when they properly consider gender related opportunity and risk. The work PFAN is undertaking in the climate and gender nexus is needed and an area we remain closely engaged.

PFAN also has the potential to make a big difference in small, nascent markets currently dominated by donor finance, like the Pacific Islands. PFAN’s advantage in these areas is its support for local coaches supporting local businesses to attract the finance needed for context specific, home grown climate solutions. Linking these ideas to contemporary experience in other parts of the world should prove very promising in the Pacific context where innovation and creative thinking is key.

In terms of scale—there are almost infinite possibilities in Southeast Asia’s energy transition which PFAN is already tapped into but also in adaptation which PFAN is growing its support for.

Something PFAN and its Steering Committee could consider is if PFAN has a bigger role to play in the net zero transition—potentially supporting emerging carbon markets, nature-based solutions and the circular economy.

Whichever future directions PFAN takes it should maintain its locally based approach, growing local markets for the long term and helping investors understand and navigate those markets.