Part 4/5 - FUNDING AND INVESTMENT MATTER!
Effective climate action by multiple non-state actors, be they businesses, cities or regions, could make significant contributions to narrowing the global emissions gap, adapting to climate change, and demonstrating to governments that higher ambition is desirable and doable. Going beyond words, this 5-part series titled Beyond words: Climate Actions for a Green Economy show that these actors are hard at work and delivering. By Jovin Hurry
French President Emmanuel Macron launched the One Planet Summit in Paris to mark the second year anniversary of the Paris Agreement last December 2017.
Given the urgency of climate change, which is happening faster than expected and could result in upwards of 4 degrees celsius warming by 2100, the Summit was preceded by a special "climate finance day" which attracted hundreds of representatives from media, business, and dozens of Heads of State.
It was meant to accelerate the roll out of the Paris Agreement by providing a platform for new public and private partnerships, in particular those that seek to mobilize climate finance, which was hoped to motivate governments to increase their national targets for pollution cuts and finance transfers.
It is sad to note that there exist extreme fossil fuel projects which are still receiving public finance support from the World Bank, multilateral development banks, and export credit agencies. These institutions provide $71.8 billion per year in public finance for fossil fuels, and comparatively only $18.7 billion in public finance for clean energy.
Unless the demands to immediately move away from financing for oil and gas exploration projects, coal mining, and coal-fired power plants are met, the 1.5 degrees celsius temperature threshold of the Paris Agreement may be lost within a few short years.
It is high time for heads of government to reconcile their public investment portfolios with the climate science underpinning the Paris Agreement. Every dollar invested in cutting greenhouse gas emissions and adapting to climate change gets double the return on investment.
Read the rest of the articles in this climate action series:
- Part 1 Youths take charge of their future
- Part 2 Businesses ramp up on innovation and collaboration
- Part 3 Airports and planes on the sustainability tarmac
- Part 5 Rethinking models for climate financing
Fortunately, new partnerships and initiatives for global climate action that bring expertise and experience together have been on the rise, and need to be encouraged, in terms of the impact they could have in tackling climate change and helping cities and vulnerable communities.
Finance for climate is flowing at a greater pace than ever, with vibrant and growing markets for renewable energy, electric vehicles, green buildings and climate-smart agriculture seeing aggressive growth, backed by exponential advances in innovative green financial instruments, indices and markets. One of the main actors is the The European Investment Bank (EIB), also known at the Bank of the European Union.
The EIB is the world's leader in climate finance, with a projected $100 billion of climate-related investment in the next five years. With its triple A rating, the EIB has also a valuable multiplier effect in mobilising private capital.
It is, for example, a cornerstone investor in the Land Degradation Neutrality Fund, the first of its kind, that pairs private and public capital to finance sustainable land management and restoration all over the world. Restoring degraded land is a vital, however, as yet an underestimated opportunity to reduce greenhouse gas emissions and help communities to adapt to climate change.
In addition, the evolving partnership with the Global Covenant of Mayors, part of the new global Urbis initiative, aims to develop an innovative advisory and financing facility focused on fostering climate action investments in cities.
EIB Vice-President Jonathan Taylor said, “We are immensely proud that two of the initiatives we are supporting have been highlighted as transformative in the context of international efforts to make the Paris Agreement a reality.”
“These two ambitious and ground-breaking initiatives to support cities’ climate action efforts and to promote sustainable land use through projects around the world reflect the EU Bank’s strong belief that it is only through building new and concrete partnerships that we will get the job done. The challenge before us is immense and pooling expertise and experience as we are doing is the way we must move forward.”
The EIB has so far provided finance for sustainable urban infrastructure both directly and through intermediated lending to well over 1000 cities and towns worldwide. In the last six years alone, lending dedicated to climate action - mitigation and adaptation - under EIB’s urban financing amounts to about $35 billion.
An example of the EIB’s activities to mobilise private money for climate action is the Luxembourg-EIB Climate Finance Platform, which is the first time a Member State funds an entire climate finance platform rather than an individual climate finance operation.
An even earlier platform is the Global Energy Efficiency and Renewable Energy Fund. This has blended first loss capital from public sources with private capital from institutional investors to support investment through equity (participations) in small and medium-sized renewable energy projects in developing countries.
In Luxembourg recently, the board of the European Investment Bank approved a total of $9.2 billion of new financing for 38 projects in 16 European Union countries and around the world in Africa, Asia and Latin America.
This includes support for transformational investment to harness onshore and offshore wind energy, expand high-speed mobile broadband and strengthen industrial innovation. New schemes to improve water infrastructure, build new hospitals and construct new high speed rail links were also approved.
Hence, both raising the ambition to act on climate change and raising the large amount of finance needed to do it are so completely interconnected that governments and the entire financial sector must see it as a single challenge. Around $1.5 trillion of climate finance need to be mobilised every year.
The finance sector is recognizing to a much greater degree where and how climate change presents risks to its existing investments and the need to adjust their portfolios away from carbon-intensive assets to reduce that risk. It is hoped that this continues because the results directly support the only sustainable future possible, which is captured in the international community’s 2030 Agenda for Sustainable Development.