The competition to finance infrastructure projects and expand global influence between the U.S. and China is taking on a new dimension as countries address adverse effects of climate change.
The U.S. International Development Finance Corporation (DFC) has repeatedly stressed that the U.S. efforts are markedly different from China's Belt and Road Initiative (BRI).
"The DFC is very affirmatively seeking to provide an alternative to the type of financing that China provides through its Belt and Road Initiative," Jake Levine, chief climate officer at the DFC, told Yahoo Finance Live (video above). "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 ... sort of debt-trap financing."
Launched in 2019, the DFC partners with the private sector to develop projects that address needs in developing countries through debt financing, project financing, and equity investments. The agency currently plays a key role in the Biden administration's climate ambitions.
Under Biden, the DFC has committed to doubling down on climate-related solutions by increasing its climate-focused investment to 33% of new investments beginning in 2023. Levine noted that projects financed by the DFC include investments in climate mitigation, adaptation, and resilience in developing countries.
"We’re now seeing that the market is clearly headed towards clean energy," Levine said, adding that the DFC is hoping to accelerate 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."
Levine added that developing countries are increasingly accepting the U.S. offer to provide an alternative to China's investment vehicles.
"The U.S. government is working with... the G7 and providing a values-based alternative focus on sustainability — not just on climate sustainability — but also financial sustainability, and focused on making investments that are ultimately good for the countries where we are providing investment," Levine said. "That includes bringing up basic environmental and social and labor standards in line with American values."
A recent report from the UN's Intergovernmental Panel on Climate Change (IPCC) unequivocally blamed human activity for warming temperatures that have triggered extreme weather events. While the U.S. and China remain the biggest emitters of greenhouse gases, the impact of those emissions has fallen most heavily on debt-distressed nations that don't have the financial backing to invest in clean energy.
President Biden has already vowed to double U.S. international climate finance in the next three years and triple funding for adaptation. Earlier this year, the Group of Seven (G7) leaders announced a new initiative called Build Back Better World (B3W) to better compete with China when it comes to funding the world's infrastructure needs.
"The Biden administration has really focused its efforts overseas in ensuring that the U.S. is playing a leadership role," Levine said, "both within the context of the [United Nations Framework Convention on Climate Change] and the COP26 meetings coming up in Glasgow, and also more broadly through the G7 and the G20."
Akiko Fujita is an anchor and reporter for Yahoo Finance. Follow her on Twitter @AkikoFujita
Aarthi Swaminathan is a reporter for Yahoo Finance. She can be reached at firstname.lastname@example.org. Follow her on Twitter @aarthiswami.