A finance scheme designed to raise up to 75 billion dollars (£58 billion) for building clean energy projects in poorer countries is to launch on the London Stock Exchange (LSE).

The scheme, set up by green finance body the Climate Investment Funds (CIF), is a new financial mechanism designed to boost climate funding globally.

CIF’s new Capital Market Mechanism will issue investment-grade bonds, listed on the London market, then distribute funding to help pay for new projects such as wind or solar farms in countries struggling to raise enough cash to build them.

Prime Minister Sir Keir Starmer and World Bank president Ajay Banga at the beginning of a bilateral meeting on day two of the Cop29 climate summit in Baku, Azerbaijan
Prime Minister Sir Keir Starmer and World Bank president Ajay Banga at the beginning of a bilateral meeting on day two of the Cop29 climate summit in Baku, Azerbaijan (Carl Court/PA)

The mechanism is expected to direct as much as £58 billion of funding, much of it from the private sector, to developing countries over the next decade with the World Bank acting as the trustee.

The Government said on Tuesday that the finance tool would be launched on the LSE following a meeting between Sir Keir Starmer and the president of the World Bank, Ajay Banga, at the Cop29 climate summit in Baku.

Sir Keir said it was “high time the private sector played their part in this”.

A Downing Street spokesperson said Sir Keir and Mr Banga “agreed on the importance of mobilising private finance to strengthen action to tackle the climate challenge, and the Prime Minister welcomed the World Bank’s ambition in this area”.

They added that the deal showed London as “a green finance capital, and bolstered Britain as an attractive place to invest in the future”.

CIF was set up in 2008 to pool resources from contributor countries including the UK, and ultimately help fund green projects elsewhere.

Gareth Redmond-King, head of international programme at the Energy and Climate Intelligence Unit, a think tank, said Sir Keir’s acknowledgement of the “critical importance of climate finance … sends a significant message”.

He said: “Hosting the CIF market mechanism in London probably means the UK is offering rather more than just good coffee and snacks in a nice office; in reality, this is also a powerful signal of the UK’s commitment to lead globally in mobilising the climate finance needed from all sources, to support developing nations.”

It comes after the UK on Tuesday pledged at the summit in Azerbaijan to cut its own carbon emissions by 81% by 2035, a goal which is in line with recommendations by the Climate Change Committee.

This target is based on reducing emissions compared with 1990 levels and forms the UK’s nationally determined contribution (NDC) – a commitment that countries make to reduce their greenhouse gas emissions to mitigate climate change.