U.S. International Development Finance Corporation Chief Climate Officer Jake Levine joins Yahoo Finance Live to discuss how the U.S. is stepping up its global investment in green energy.
AKIKO FUJITA: Well, leaders from nearly 200 countries are gathering in Glasgow this fall to come up with a collective plan to tackle climate change. The UN Conference known as COP26 will call on countries to get ambitious targets to reach net zero greenhouse gas emissions by the middle of the century. And for the biggest emitters, like the US, there is added pressure to financially help developing countries develop their low carbon footprint.
To discuss that, let's bring in Jake Levine. He is US International Development Finance Corporation's Chief Climate Officer, a new role here at the agency. We've also got Yahoo Finance's Aarthi Swaminathan joining in on the conversation. Jake, it's great to talk to you. For those who are not familiar necessarily with what the DFC does, it's the government arm that helps develop these, help finance private development in developing countries.
A lot of questions around the US commitment in helping a lot of the poorer countries reach these broader goals. How do you prioritize these projects by region and, specifically, by the types of projects the US is looking to finance?
JAKE LEVINE: Sure. Thanks, Akiko. And hi, Aarthi. It's great to be with you guys to talk about this important subject. A lot going on in the lead up to COP26, and we're going to be a big part of that. Just to give you a little bit of context, the DFC, the Development Finance Corporation, is basically America's development bank. We were authorized in 2018, under legislation in Congress called The Build Act, to invest up to $60 billion in low and low-to-middle income countries around the world.
And we have a whole array of financial tools to do that. We work with debt financing in Project Finance. We do equity investments, both in direct equity investing and also through the use of funds. And we now, really importantly, have a new technical assistance capability, which, particularly when we're talking about climate in developing economies, is critical to the work of actually ensuring that projects can become feasible and can meet the various sort of technical capabilities that we need them to meet, whether it's an energy project, transportation, buildings decarbonization, industrial, nature-based solutions, sort of across the gamut.
And in terms of what we're doing on climate, the Biden administration has really focused its efforts overseas in ensuring that the US is playing a leadership role, both within the context of the UN policy and the COP26 meetings coming up in Glasgow and also more broadly through the G7 and the G20. DFC is sort of taking the lead on that climate piece. We have committed to investing at least one third of our overall portfolio in climate-linked investments.
We committed to being net zero as a financial institution by the year 2040, which is the most ambitious net zero commitment of any of the major economy's development finance institutions. And we've rolled out, as I sort of alluded to earlier, this key technical assistance facility, $50 million over five years. Happy to go into more detail on any of that.
AKIKO FUJITA: So Jake, going back to the question of how you pick your priorities, when you've got this grand goal really, I mean, there's a long list of projects that need to be pursued. How big of a factor does the competition with China play into that, at a time when they are investing billions of dollars in emerging economies?
JAKE LEVINE: Well, it's important. I mean, look, the DFC is very affirmatively seeking to provide an alternative to the type of financing that China provides through its Belt and Road Initiative. China has engaged in certain development finance practices that are more in line with the type of practices that you see coming from authoritarian governments. You see other recipient governments oftentimes pressured to take on this type of sort of debt trap financing.
And the US government, working with its partners through the G7, is providing a values-based alternative, focused on sustainability, not just on climate sustainability but on financial sustainability, and focused on making investments that are ultimately good for the countries where we are providing investment. So that includes bringing up basic environmental and social and labor standards in line with US and American values, and the types of values that we don't see coming from other types of investors, like China and others.
AARTHI SWAMINATHAN: Jake, for a developing country, when they're considering costs, there is tendency to focus on something that's established, like coal fossil fuels. But how has that conversation changed? Are countries more receptive to receiving DFC, as you move into this new administration?
JAKE LEVINE: Absolutely. And this also plays into this question of sort of where are we prioritizing our work. And as you're likely well aware, the US is driving a number of really positive, both bilateral and multilateral, conversations in the context of the UNFCCC, so our discussions with other nations, such as Indonesia, South Africa, Brazil, India, in particular, in terms of their specific transitions, energy transitions, away from heavily polluting fossil energy and towards clean energy.
And when when we come into the market, it creates sort of the possibility for the private sector to follow on. This is core to our mission is to be able to derisk investments that would otherwise provide too high of a risk for the private sector to want to follow on and crowd in, in terms of our investments. And we're now seeing that the market is clearly headed towards clean energy.
I think on the previous segment, you talked about just- or I'm sorry, on a previous segment, you had talked about just the record amount of investment that we're seeing into climate, whether that's on the venture side or private equity or from institutional investors. And what we're focused on doing is sort of accelerating that transition in the markets where it's hardest to do and where it's been the slowest so far because of various market-specific risks.
AARTHI SWAMINATHAN: And just linking back to the developments that are happening with regards to Afghanistan, you mentioned the Belt and Road. There is a very key part Afghanistan has to play because of its proximity to Pakistan, which is a big partner for China. How is the DFC thinking about these developments? I know that, obviously, there might not be investments there. But what is going on with the thinking there? I'm curious.
JAKE LEVINE: DFC, you know, we are focused on providing development value in the toughest environments, where it is most difficult to provide private financing. And so a lot of times, you see that happening in countries that have been navigating really, incredibly the hardest, most challenging problems, such as conflict migration, civil war. And we look forward to the opportunity to evaluate specific transactions that can help drive the American development agenda in those countries and, particularly, around the world in the most difficult situations.
AKIKO FUJITA: And Jake, finally, as we look ahead to COP26, there is sort of this nagging question about US credibility on the issue of climate. The UN has consistently pointed out that $100 billion commitments that was placed by developed countries back in 2009. That commitment still hasn't been met. What do you say to those countries who say, how do we know that the US is all in? And how do you rebuild the US credibility on this very issue?
JAKE LEVINE: It's a great question. It's a really important question, Akiko. And I just want to reassure some of those countries and partners and allies that this is a central area of our focus. We are working day in and day out to ensure that the developed economies, including with the US in the lead, can actually keep that commitment that we made in 2009 at the Copenhagen COP. And that we are working hard to accelerate the degree to which we're able to provide financing and help to reach that $100 billion goal.
It is key, as you note. Because in nations around the world that are still developing, they're experiencing a convergence of both coping with the impacts of climate change and also experiencing their own emissions on the rise. And so it's incumbent upon countries like the United States and our partners in the OECD to be providing financing to help navigate that transition and support the work of developing economies.
Well, Jake, we hope to keep the conversation going with you. Jake Levine, US International Development Finance Corporation Chief Climate Officer and our very own Aarthi Swaminathan as well, thanks--