Friday Phiri :
Climate finance has never been more urgently needed, with massive investments in climate action required to meet the goals of the Paris Agreement and avoid the devastating effects of a warmer planet. However, it is an open secret that public financing mechanisms alone are not enough to meet the demand for climate finance, especially for developing countries whose cost to implement their conditional Nationally Determined Contributions (NDCs) and transition to low-carbon economies is pegged at 4.3 trillion dollars.
Scaling up and accelerating innovative approaches to climate finance from multiple sources, including the private sector, has emerged as a key strategy to meet the goals of the Paris Agreement. This is a huge price-tag when compared to the Green Climate Fund (GCF’s) current coffers, which are still being counted in billion terms. The GCF is one of the designated UNFCCC financial instruments created at COP 17 in Durban, South Africa.
Therefore, scaling up and accelerating innovative approaches to climate finance from multiple sources, including the private sector, has emerged as a key strategy to meet the goals of the Paris Agreement through long-term and predictable climate-smart investments. It is for this reason that the World Bank and partners has been organising platforms in which ways of leveraging public resources with private sector financing are discussed.
One such platform is the Innovate4Climate, launched in 2017 in Barcelona. It serves as an integral part of the global dialogue on climate finance, sustainable development, carbon pricing and markets. This year’s event, set for Frankfurt from 22-24 May, with four thematic areas, convenes global leaders from industry, government and multilateral agencies for a one-day Summit, workshops and a Marketplace, to work and dialogue on development of innovative financing instruments and approaches to support low-carbon, climate-resilient development pathways.
The business case for climate investment
Under this pillar, the focus is on the important role of the private sector to fight climate change. It explores climate-related business opportunities such as how to create markets for climate investments, and which approaches are effective in de-risking investment opportunities.
At the meeting, this stream is set to showcase sustainability and climate-resilient initiatives of business associations and industries, present models of collaboration and partnerships between public and private sector, as well as analyse trends and new initiatives in mobilizing development/climate finance, to match developing country investment needs with private sector capital.
A classic example under this theme is the GCF blended model-the use of four financial instruments: concessional loans, equity, grants, and guarantees that can be used through different modalities and at various stages of the financing cycle. Debt and equity instruments help close a specific financing gap for specific projects and programmes, thus bringing more projects and programmes to fruition, while guarantees help to crowd in new private sector financing from multilateral development banks, national development banks, and others.
“We are starting to see it already with the GCF,” says Fenella Aouane, Global Green Growth Institute (GGGI’s) Principal Climate Finance Specialist. “They put out the 500-million-dollar private sector facility…they have gone into the market for the entirety of the private sector globally, they put out a call for proposals to spend up to 500 million. Now relate that to the fact that in a single board meeting in February, they approved projects worth 1 billion.”
NDC Implementation-policies and finance
Another central theme of the Innovate4Climate conference this year is focusing on improving access to finance and support for capacity building to successfully implement countries’ NDCs. This stream targets initiatives aiming at getting “further-faster-together” for NDCs implementation.
The key questions revolve around how to improve access to available funding and mobilize new sources, to strengthen climate finance readiness and accelerate disbursement of climate finance, how to increase and sustain ambitions, and ensure accountability and how to reduce transaction costs through standardisation and simplifying processes.
Innovation for climate resilience
Technology is a crucial component of the Paris Agreement’s means of implementation pillar. There is no question that innovative technologies and financial instruments are changing the narrative of climate change resilience. Thus, this stream presents achievements and models in climate smart agriculture, climate action in cities, and disaster risk management among others.
And in relation to the theme of technology, Tony Simon, Director General of the World Agroforestry Centre (ICRAF), recently emphasised the importance of adopting locally-relevant options that enhance agricultural productivity, for example, in relation to climate change adaptation and mitigation through exploring innovative finance instruments.
“Explore innovative finance instruments,” said Simon at the UNFCCC organized first regional Talanoa which was part of the Africa Climate Week, held in Nairobi in April 2018. “Private equity offers a huge amount of money. Use the money from CTCN and other sources to pull in other funds and use that as an opportunity to blend financing for climate change initiatives.”
Climate market and metrics
Under this theme, the focus is on the contribution of market-based approaches to efficient and cost-effective climate change mitigation. Delegates will discuss current and future trends around practical outcomes of international negotiations on Article 6 (voluntary cooperation on mitigation and adaptation actions). The theme also seeks to understand what can be expected from aviation and shipping.
“One area where forestry hopes the private sector may be interested is-the airline industry is currently trying to decide how it will offset its emissions as an industry and one way that might do this is through the purchase of carbon offsetting assets so that could be forestry in the form of some level of carbon credit,” GGGI’s Fenella told IPS. “If they do this, then there will be a possible clear return for investors.”
While the Innovate4Climate conference gets underway in Frankfurt next week, it seems the private sector approach by GGGI is already paying dividends. According to its 2017 Annual report, GGGI helped mobilize over half a billion dollars for green investments that aim to support developing countries and emerging economies transition toward environmentally sustainable and socially inclusive economic growth.
It contributed to the mobilization of 524.6 million dollars in green investments in Ethiopia, India, Indonesia, Rwanda and other countries in which the Seoul-based international organization operates.
-IPS
