Mobilizing the Private Sector to Finance Adaptation

Posted on November 17, 2016 by deej

Today at COP 22 the Japanese delegation hosted a side event at their pavilion about mobilizing the private sector to finance climate change adaptation. The panelists discussed ways to involve the private sector from regional, business, and public policy perspectives. The panelist from Bangladesh, Dr. Saleemul Huq, then present specific examples of how the private sector has helped mobilize adaptation finance in his country. The World Bank estimates that $70-100 billion will be need annually from 2010-2100 to adapt to the impacts of climate change. It also estimates that the private sector could mobilize $140-240 billion for adaptive measures annually during the same period. However, very few companies are pursuing these adaptive measures, due in large part to the lack of profitability. To mobilize the private sector, governments and international organizations must incentivize investments and enhance monitoring and reporting efforts to ensure sufficient return on investments. The private sector will only finance adaptation measures that are also good for their bottom line.

Dr. Saleemul Huq, director of the International Center for Climate Change and Development at Independent University and lead author of chapters in the IPCC’s Assessment Reports provided an example of a good adaptation measure and a bad, or maladaptation, measure. Both projects involved mobilizing private sector finance to adapt to climate change . But the latter created more problems than it solved. In the good example, a private agricultural business developed and sold salt-water resistant rice to combat the inundation of rice fields by salt water. The company turned a profit and made a vulnerable population more resilient. In the maladaptation example, a private aquaculture company bought up inundated rice fields, turned them into shrimping operations, and then leased the operations to the farmers. These shrimping operations are good for the companies, who turn massive profits, and the government, which taxes the shrimp exports. While this practice is aimed at adapting to an increasingly saline ecosystem, it is highly exploitative of the rice farmers, most of whom lost their jobs after selling their farms, and drastically altered the landscape by making it entirely salt-water based. The company turned a profit but the social and environmental impacts made a vulnerable population more vulnerable. These examples underscore the opportunities and challenges associated with mobilizing private sector finance to adapt to climate change. We have to remember that in board rooms and commercial banks, money talks and altruism takes the backseat.

Financial instruments ignite SCF Forum on L&D risk

Posted on September 14, 2016 by achristian

Some sparks flew and some eyes got opened at the 2016 Forum of the UNFCCC Standing Committee on Finance (SCF), held in Manila last week. The Forum’s exploration of financial instruments for addressing the risks of loss and damage was at the request of the Executive Committee of the Warsaw International Mechanism (WIM) on Loss and Damage (L&D) in service of Action Area 7 of its 2-year workplan. (For some past posts on the WIM, including on this significant SCF-WIM linking, see here.)

The Forum drew nearly 150 representatives of governments, financial institutions, civil society and the private sector. The webcast (which covered much of the meeting) along with informative tweeting (#scfmanila) from a number of participating institutions and individuals offered remote observers some interesting insight. But first a little context/framing:

Addressing L&D – Basically, addressing L&D involves: 1) avoiding it, and 2) meeting it when it is unavoidable. L&D can be avoided primarily through mitigation and adaptation. In addition, reducing the risks of L&D (e.g., through early warning systems and disaster preparedness plans) can help prevent it. Unavoidable L&D can be minimized through certain types of risk management (sharing, savings/credit, insurance instruments, catastrophe bonds). Because L&D still occurs, even if it is minimized, responses to it rely on disaster response and management and climate services.

WIM workplan Action Area 7 – A close reading of Action Area 7 reveals one goal, one objective (how the goal is to be accomplished) and one strategy/action (how the objective is to be met):

Goal = facilitate finance in L&D situations;
Objective = “encourage comprehensive risk management;” and
Strategy = “diffus[e] information related to financial instruments and tools that address the risks of [climate-induced] loss and damage…”

Action Area 7, through encouraging risk management, tends to both avoiding L&D and minimizing unavoidable L&D. As for the SCF Forum, it fit within Action Area 7’s strategy of diffusing information, by covering risk pooling and transfer, catastrophe risk insurance and bonds, contingency finance, social protection schemes, and other instruments.

Cat bond transaction structure (rms.com, 2012)

Throughout the event, however, it was clear that some participants were focused on the goal, while others (predominantly the insurance experts) were focused on the objective and/or strategy. The resulting friction illustrated the philosophical and political tensions that continue to fester in the climate regime in the absence of financial support to directly address loss and damage. The workplan, after all, is devoted essentially to compiling, diffusing and leveraging information. (We wrote about the Paris Agreement/Decision role in this evolving issue in our COP21 Documentation Project.)

The Forum did enhance understanding both of the gaps and opportunities with existing financial instruments, as well as the barriers that must be addressed to reach the most vulnerable with any versions of current and emerging risk instruments. (See the Forum page for presentations and the WIM Financial Instruments page for a well-organized host of relevant resources.)

Among the conclusions was that both cross-sectoral collaborations and integration of approaches are vital to deal with the risks of L&D. Importantly, two significant areas of concern remained unaddressed:

The absence of actionable approaches for addressing slow-onset processes from the insurance industry and related market players. Not surprising, given that there are generally no dramatic moments of humanitarian focus and no money to be made.
The absence of financial instruments and tools to address non-economic losses. Without a means to monetize, the financial sector has yet to be effectively engaged toward this cost.

We will be tuning into the WIM Executive Committee’s 4^th meeting later this month to learn its response to the Forum and more.

SCF, Meet Loss and Damage

Posted on April 12, 2016 by achristian

The Warsaw International Mechanism (WIM) on Loss and damage (L&D) is going on a somewhat surprising date this year with the Standing Committee on Finance (SCF). The job of the SCF is to assist the UNFCCC Conference of Parties (COP) in conducting its climate finance functions. The job of the WIM is to enhance action and support to address loss and damage in developing countries particularly vulnerable to climate change impacts. (We’ve covered the WIM and L&D extensively, e.g., here, here and here.)

The reason this ‘date’ is interesting is that nowhere in any COP decisions is the SCF directly instructed to engage the issue of L&D or pursue a close relationship with the WIM. Climate finance language is strictly aimed at mitigation, adaptation, and building capacity and enabling environments for those. Yet, sometime in mid-2016, the SCF will hold its annual Forum designed to advance communication and information exchange as well as linkages. And, this forum’s topic will be: “Financial instruments that address the risks of loss and damage.”

It is true that, at COP19, Parties asked the SCF to “further enhance its linkages with the Subsidiary Body for Implementation and the thematic bodies of the Convention.” It is also true that, at COP21, Parties decided to endorse the SCF’s 2016-2017 workplan, which included this year’s Forum. But the guardian may not realize what seriousness (mischief?) might come of this liaison between two of its wards.

The WIM’s Executive Committee actually made the first move at SCF’s 11^th meeting in October 2015, requesting the ‘date’ based on an aspect of its 2-year workplan approved by COP20. And, while the WIM might not have looked like the SCF’s type, there apparently was enough chemistry for a quick “Yes.” Earlier this month, at the SCF’s 12^th meeting, the 20 Committee members reviewed input from multiple stakeholders and got the plans rolling.

What makes this kind of engagement between the SCF and the WIM important, is that, even though the Paris Agreement includes a distinct article on L&D (quite a significant outcome), it contains no provision for financing efforts to address this critical climate change issue. Thus, the SCF giving its attention to L&D could be extremely influential.

One clear way this can happen beyond the exposure and focus of the forum, is through the 2016 Biennial Assessment and Overview of Climate Finance Flows (BA), on which the SCF began work during its 12th meeting. The BA is a comprehensive compilation used to support the COP’s climate finance responsibilities. Not surprisingly, L&D received no attention in the 2014 edition. It most certainly will in the 2016 BA, with the Forum’s attention to this substantive issue.

Where Parties take it from there will tell a lot about the prospects for these two. Will the SCF and WIM really bond? Will they decide to go steady? Might there be a real future for L&D under the climate finance wing of the climate regime? Some are undoubtedly dreaming of wedded bliss!

And now we wait…

Posted on December 12, 2015 by sara

Delegates and negotiators have worked around the clock for days (weeks, months, and years for some) to put together an agreement with prospects of being adopted. If everything goes according to plan, today, their efforts will come to fruition. COP21 President, Laurent Fabius, made an impassioned appeal this morning in support of the final text, urging delegates to set aside any remaining doubts and to approve this agreement for the good of mankind.

This afternoon the final version of the Paris Agreement was released. The plenary was originally set to reconvene at 3:45pm, after the delegates had time to review the new draft. But, in order to accommodate additional negotiation meetings, the plenary has now been rescheduled for 5:30pm. In the meantime, everyone is sitting in groups and circulating amongst constituents to review and discuss this historic document.

Photo courtesy of Catie Davis

Photo courtesy of Catie Davis

Photo courtesy of Catie Davis

The venue is practically vibrating with anticipation. Yet, at the same time, there is an anticlimactic feeling in the air. Because the event was officially scheduled to end yesterday, the vendors have all vacated, the NGOs and other advocacy organizations have abandoned their posts, and most of the civil society members are either traveling home or are participating in the demonstrations throughout Paris. Booths are being deconstructed, rooms are emptying, and even the water fountains have been turned off. All of the remaining energy in the building is going toward high-level political meetings that will determine whether this agreement thrives or fails.

Photo courtesy of Sara Barnowski

The mood in the observer hall rather accurately reflects my own personal feeling toward portions of the final version of the text. The agreement as a whole represents an historic shift in the global response to climate change. There are many ambitious provisions, and the Parties have done an admirable job compromising to create a workable agreement. For all those who have been lucky enough to be part of this process, it is a wonderful and exciting moment. However, the language related to the scale of developed countries’ financial commitment to climate change has been removed from the legally binding portion of the agreement, here, at the eleventh hour.

Photo courtesy of Rebecca Davidson

While the non-binding goal of the agreement calls upon the Parties to set a “new, collective quantified goal from a floor of USD 100 billion per year,” by 2025, the agreement itself only notes that, “mobilization of climate finance should represent a progression beyond previous efforts.” This organization leaves generic and ambiguous language in the heart of the agreement, and transitions the specific objectives to the unenforceable portion of the agreement. As someone who has focused on the finance components of this text for several months, this end result seems somewhat disappointing.

Nevertheless, this agreement does achieve many important goals and creates a framework to combat climate change that many did not think would be possible. All that is left is to wait for the Party representatives to approve it. As President Fabius noted this morning: “The world is holding its breath. It counts on all of us.”

COP21: The Gathering – What are we willing to trade?

Posted on December 11, 2015 by sara

From: http://images.google.fr/url?sa=t&rct=j&q=&source=imgres&cd=1&cad=rja&uact=8&ved=0ahUKEwjX9dGQ-tTJAhXJXRoKHUt7AtIQ5RMIBDAA&url=http%3A%2F%2Fgeekspodcast.com%2F2010%2F04%2F29%2Fhow-i-organize-my-magic-the-gathering-cards%2F&usg=AFQjCNHGMS49fmEdu2avr5ZpqFpTLEfn6g

From: http://geekspodcast.com/2010/04/29/how-i-organize-my-magic-the-gathering-cards/

There are many analogies used to describe the climate negotiations, some of which – including fractals, webs, and dances – have been referenced right here on this blog. At this stage of the negotiations though, another metaphor comes to mind: that of trading card games. With the initial deadline for an agreement hours behind us, negotiators are making every effort to cobble together a robust outcome that will be approved by the Parties before the close of the week. At this phase, the foundation of the agreement is in place and global political leaders are negotiating the last remaining bracketed words and phrases.

This is not entirely dissimilar to trading card games, in which players build their decks over time, collecting cards that will serve particular purposes, and trading to create a final arrangement that will win the game. In Paris, negotiating groups continue advocating for particular measures, steadfastly insisting on their inclusion in the final deck. But to reach the finish line and present a substantial and effective climate agreement to the world, compromises must be made, trades brokered, and deals coordinated. And importantly, the trading cards being dealt here do not come in little foil packages, but represent language choices with grave impacts for real people across the world.

Photo courtesy of Rebecca Davidson

In the most recent version of the text, it is clear that Parties have reached some compromises, making informed sacrifices in order to preserve their most valued cards. Of particular note is how the language on finance has evolved over the last thirty-two hours. Financial obligations are addressed under Article 6 of the agreement, and since the previous version of the text on December 9th, the vast majority of the uncertainty has been removed from the language. Only a few lonely brackets remain, indicating that parties have worked furiously to resolve much of the underlying disagreement.

From: http://www.thenational.ae (Vesela Todorova)

While trade-offs are apparent throughout the text, the give-and-take strategies are particularly notable when developed and developing countries try to reach agreement around financing. For example, some large developed countries insist that they will not agree to new, legally binding financial obligations. Simultaneously, some developing countries insist that they will not agree to a system that saddles all parties equally with the financial burden for climate change. Many of the outstanding challenges similarly relate to notions of differentiation of responsibility and ambition.

A potentially underappreciated trade occurred in reconciling Paragraphs Five and Six in the most recent text. Developing countries lost an important component of their deck when dedicated funding for loss and damage was omitted. The earlier version of the text had obligated developed countries to ensure adequate financial support for the International Mechanism to address Loss and Damage, and to promote and support financing for irreversible damage from climate change. This paragraph no longer exists in the draft text.

However, developed parties offered a trade by including vital language related to the scale of financing to be provided. Paragraph Five in the current text calls for consideration of the priorities and needs of developing countries, with a focus on public, grant-based resources for adaptation. This represented a valuable trade for developing countries because, even without the loss and damage funding, this section prioritizes adaptation projects in developing countries when allocating grants and public funding, which are highly sought-after.

These are the types of deals that must be finalized amongst 196 parties before Sunday morning. It will be fascinating to track the outcomes of these trades in the final agreement.

The weaving of the Paris Outcome

Posted on December 10, 2015 by achristian

The unfolding Paris Outcome is a web of complexities, in both the package and the process. In the package itself, there are cross cutting issues; there are a myriad of details; and there are interlocking linkages among Articles and Decision sections that make multiple circles back to each other. It can be a dizzying endeavor to really grasp it all. And there are plenty of threads under a lot of tension.

The process, too, is multi-layered and multi-faceted. We’ve done the in-depth reporting here and here on its various parts, and how it all spins together, and shared a description of this week’s ministerial level action.

After last night’s Party and negotiating group comments on the December 9 draft text, the ministerial-led informal consultations were shifted into open-ended indaba-type consultations (a South-African consensus building approach), on the three key political issues: Differentiation, Support and Ambition. Alongside those consultations were open-ended informal ones on Loss and Damage, Cooperative approaches and mechanisms, Forests, and the Preamble. At this point, we are waiting for a December 10 draft that compiles the work of those early morning negotiations.

For those nervous about getting lost in the web of it all, a short, simple construction of where we are now comes to us today compliments of seasoned South African delegate, Alf Wills:

Reaching a Paris Outcome requires that 3 interrelated levels be addressed:

1) Those High level political issues = Differentiation (how to fairly account for differing levels of development, capacity, and financial resources between Parties for determining responsibilities), Support (how much, from whom, to whom, for what purpose), and Ambition (how much in emissions reduction, toward what goal, and when)

2) Medium level issues = including cycles (for reporting/reviewing/increasing ambition and support), non-market mechanisms, and adaptation

3) Technical issues related to the rules.

According to Mr. Wills, the ministers must solve the top level issues before they can unlock the medium level issues, which will then inform the technical issues. Other negotiators seemed to agree.

Certainly, Mr. Wills construction is a bit simplistic. Among other things, it doesn’t locate loss and damage. Still, it offers a short-hand way to think about the unfolding process, so it doesn’t unravel in your brain.

“Legally binding enforcement system … will reassure investors”

Posted on December 10, 2015 by tbach

U.S. Secretary of State John Kerry, who is in Paris this week for the COP21 negotiations, is making the Obama Administration’s case for the new Paris Agreement (or Paris Outcome, as it was renamed last week at China’s suggestion). “A legally binding enforcement system will reassure investors, who have to carry the low-carbon economy beyond what governments can do.” With one phrase, Kerry switched the focus from the U.S. government being a global climate leader or good international neighbor to more simply enabling capitalism to address climate change.

“It’s not that we’re going to leave here knowing that everything we do is going to hit the 2 degree mark,” Kerry is quoted as saying. “What we’re doing is sending the marketplace an extraordinary signal – that those 186 countries are really committed – and that helps the private sector to move capital into that, knowing there’s a future that is committed to this sustainable path.”

While there are currently 196 Parties to the UN Framework Convention on Climate Change (195 countries plus the EU as a regional party), Kerry was referring to the countries who filed their intended nationally determined contributions or INDCs before coming to Paris to negotiate a new climate change agreement. Most of these countries are developing countries that, under the Kyoto Protocol, do not have hard GHG mitigation obligations. Under the Paris Outcome, they would. In return, developed countries signing on to this new agreement would help them fulfil these commitments through direct financial support. While all developed countries who are party to the UNFCCC acknowledge that industrialization has largely caused atmospheric warming, and that their relative wealth enables them to finance mitigation and adaptation in the developing world, the form of this climate finance is currently one of three major sticking points in the last 36 hours of COP21.

Hard at work, waiting.

As we blogged earlier, the OECD recently reported successful progress toward the $100 billion per year starting in 2020 promised by developed countries in COP15 in Copenhagen. As of 2014, OECD calculates that some $62 billion per year has been pledged. While developing countries look at this number critically, it is the source of these funds that rankles even more. These UNFCCC parties who expect public financing – donations from governments – to make up this $100 billion. Thus Kerry’s quote today speaks volumes about the US approach to climate finance – and the current “divergence” (in negotiation speak) that has the 20,000 people here tonight at COP21 waiting for the public side of the negotiations to resume.

Secretary Kerry is no stranger to climate change negotiations. He understands well how his comments resonate in this international arena, as well as within the DC Beltway.

In a White House press release today, he reacted this way to a reporter’s question on the importance of a deal in Paris.

“I was in Rio. I’ve been in successive COPs, including Kyoto, managed Kyoto on the floor of the Senate in a senate that would do nothing unless China were deeply involved, which is one of the reasons why I went to China two years ago to try to get China involved. And I think that we wouldn’t have 186 countries with INDCs if China hadn’t joined in, so I think that’s been a very important synergy.

But I know it’s – people, you have to sort of try to find the right level of concern to express, because if you go too far people think you’re over the top. And a lot of what is happening can lend itself to conclusions that people will judge to be over the top, but they’re real. They’re absolutely real. Science is science. I keep trying to say this to people. I mean, this is not based on a supposition, what we’re doing. It’s not based on a theory. It’s not an ideology. It’s based on years and years of scientific analysis and study.

So it’s important because we could have massive human dislocation on the planet. [T]his is a matter of how we organize ourselves as human beings on the face of this planet. And it’s – but what we need to grab on to, and many of you here, particularly those in business already have, is this is not – this doesn’t have to be disruptive in a negative way with respect to economies. This is the most extraordinary market opportunity in the history of humankind. The market of the 1990s which created the greatest wealth our nation has seen since the days of no tax and the Rockefellers, Carnegies, et cetera, Mellons, we created the greatest wealth in the 1990s in America – and we shared it, by the way, with everybody. Every quintile of American society went up.

Venezuela’s #2 prepares for tonight’s meeting.

But this is a bigger market. That was a $1 trillion market with 1 billion users. This is already a 4 to 5 billion user market and valued at multiple trillions of dollars, and we’re going to spend at least 17 trillion in the next ten years on new energy projects, et cetera. So that’s why AT&T and Microsoft and Apple and Google and Walmart and GE and a whole bunch of companies have signed on to the President’s business initiative. And they’re already making pledges to make sure that their products are produced without a huge chain of deforestation, with a virtuous fuel cycle, with sustainable practices and outcomes.

And that’s going to be the difference that young people growing up now, all of whom are in touch with each other 24/7 around the world, are not going to stand for the hypocrisy and they’re not going to stand for the delay. They’re going to demand products and goods and options that are sustainable, and we owe it to them. That’s why this is what is so important in Paris.

Media waits too.

Now, a final comment. I don’t expect Paris and I never expected Paris, given the Kyoto experience, to come out with a firm, we’re going to hit 2 degrees and everybody’s going to live by the same standard. That didn’t work. It’s not going to work. The virtue of this is that every country is designing their own plan, and every country is coming to the table with what it can do, not what it’s being told to do. And that differential is going to create a huge momentum.

And I believe the reason it is so singularly important is that that market that I just talked about, it’s going to explode if we get the right market signal coming out of Paris. And I’ve never looked to the government to be the savior here.

The government isn’t going to make this decision. You are. Businesses are. This is going to be a business-driven transformation that will take place combined with just consumer demand and voter demand ultimately. And you’re seeing it in China. I mean, China just shut down its schools for two days and its transportation and said no open fire burning. And you see on the news today the pictures of what Beijing looks like. They have to do it. And they’re concerned that if they don’t do it, it could be destabilizing to the party and to the party’s interests and control of the country. So I think you’re going to see a mass movement here, particularly if Paris comes out with the judgment we hope.

Civil Society keeps the heat on for climate ambition

Posted on December 8, 2015 by achristian

As countries seek to arrive at a mutually acceptable text for the Paris Outcome this week, there is a lot of focus on ambition to reduce emissions, and on financial support to help developing countries mitigate and adapt to climate change. In fact, these are among the key high-level political issues that must be resolved. It is hoped that tomorrow’s new draft text from minsters will bring some clarity on these issues.

Civil society has been working hard to help move the needle in favor of stronger ambition and greater equity through action leading up to and at this COP.

As we reported earlier (here and here), among its contributions to the conversation is a recent report by a powerhouse group of NGOs in climate change work – Fair Shares: A Civil Society Equity Review of INDCs. INDCs are countries’ intended nationally determined contributions, statements of planned actions for mitigation (and, in some cases, adaptation) covering the next 10 or 15 years, that they voluntarily submitted prior to COP21, in keeping with COP Decision 1/CP.19 in 2013 and 1/CP.20 in 2014. (See our last week’s and previous posts related to INDCs)

With negotiations on “level of ambition” in a seemingly precarious state, we thought it helpful to reiterate the stark reality of the shortcoming of the INDCs. These pledges represent wide-ranging levels of commitment that together, according to UNEP and others, won’t achieve the emissions reductions essential for a habitable planet. There is, in fact, a deeply alarming gap. The Fair Shares report is not alone in stating that, “even if all countries meet their INDC commitments, the world is likely to warm by a devastating 3°C or more.”

The report’s assessment is based on the maximum carbon we can have in the atmosphere to provide the world “a minimal chance of keeping warming below 1.5°C and a 66% chance of keeping it below 2°C.” Its INDC analysis utilizes 2 parameters: 1) historical responsibility (based on the cumulative emissions of a country); and 2) capacity (based on national income “over what is needed to provide basic living standards”) – with these given equal weight in the calculation. The methodology appropriately accounts for “a breadth of perspectives” related to income and time benchmark complexities.

Key findings for the 10 countries covered in the report are that Russia is not contributing at all to its fair share, and that Japan, the U.S., and the EU are all falling short at levels of just 10%, 20%, and slightly more than 20% of their fair shares, respectively. Conversely, the mitigation pledges of most developing countries “exceed or broadly meet their fair share,” even though the pledges of many of those are conditional.

Enter climate finance! Notably, the “fair shares” of many of the wealthy countries are beyond what they can achieve domestically. To ‘balance the books,’ so to speak, developed countries could ramp up actions to meet their own fair share, and make clear commitments to aid developing countries in achieving theirs.

It will take scaled-up and fair cooperation among countries to address the inequitable distribution across countries’ emission reduction pledges and close the emissions reduction gap. It is uncertain if COP21 Parties will achieve this.

Thankfully, civil society is keeping the pressure on.

It’s All About the Benjamins: Ratcheting Up Financial Support for Developing Countries

Posted on December 7, 2015 by sara

In 2009 Parties to COP15 in Copenhagen agreed to a global goal of mobilizing $100B (that’s right, billion) per year for climate finance by 2020. A recent OECD report indicated that we are well on our way to achieving that goal (with $62B committed in 2014). Unfortunately though, $100B may not even be enough to keep global temperature rise between 1.5˚C and 2˚C. For this reason, much of the discussion at COP21 has centered on the scale of climate finance. Exactly how much additional funding will be necessary? For now, the answer seems to be “more.”

In response to this need, the Global Environmental Facility (GEF), one of the entities responsible for providing climate finance under the UNFCCC, announced a new initiative today: the Climate Aggregation Platform (CAP). The GEF will seed CAP with $2M, which is expected to catalyze over $100M in co-financing from other partners, including from the Inter-American Development Bank.

CAP is just one piece of an ongoing effort by all global actors to increase access to climate financing from a variety of sources. The draft Paris Outcome places an emphasis on the use of public funds, but also acknowledges the role that private finance will play in addressing climate change. Private investors, which currently comprise about 25% of global climate investment, typically offer loans rather than grants. This means that the investors expect to make their money back over time. Therefore, to entice private

Naoko Ishii, CEO and Chairperson, Global Environment Facility

investors to promote clean energy in developing countries, there must be some indication that the project represents a sound investment. CAP aims to help facilitate these types of robust investment opportunities.

First, CAP will establish a global working group to provide key finance and industry stakeholders with transparent access to, and coordination of, climate-related projects in developing countries. CAP will also promote project standardization, with the goal of creating uniform contracts and repayment plans. Finally, CAP will develop in-country demonstration projects and provide technical support for other pilot transactions. These actions will serve to increase the number of qualified projects, creating a scalable pipeline of clean energy investments.

Establishing a streamlined framework for project development has two major benefits: It increases the penetration of clean energy technologies in the developing world, thereby serving climate change goals. It also allows investors to aggregate a large number of projects, thereby reducing the financial risk. In the same way that insurance companies profit by insuring large groups of people with a variety of health risks, climate investors will be more successful if they invest in large numbers of projects with a variety of risk profiles. As your financial planner will tell you, a diverse portfolio is generally a strong portfolio.

And confidence is high that, if we build it, they will come. Since the financial crisis of 2008, there is a significant appetite for impact investments, which are transparent investments in projects that have demonstrated social benefits. Many institutional investors, along with independently wealthy individuals, are actively seeking investments like clean energy projects in the developing world. There is approximately $46B in impact investment already under management, and that number is on the rise. Leveraging a small amount of public money has been shown to catalyze additional private investment in these types of projects. Some studies indicate that $1 of public funding can attract $20 of private funding. Just last week, Bill Gates alone pledged to contribute $1B in seed capital to potentially transformative energy systems with “near zero carbon emissions.” And he’s getting his friends to pitch in too.

Developing programs like CAP that foster a strong market for investment in climate-friendly projects is one of the most important things that come from COP21.

Finances are the Glue that will make the Paris Agreement Stick

Posted on December 7, 2015 by linda

Starting the second week of negotiations, the Climate Action Network’s held a press conference to discuss their view of the current “state of play” in the climate talks. Two themes clearly emerged; the need for a robust and certain climate Agreement to come out of Paris with clear targets and deadlines to send the correct signal to the industrial and business sector, and the financial support from developed countries to reach those targets and deadlines. What constitutes a robust agreement? Review of ambition goals coupled with a ratcheting mechanism to achieve a 1.5℃ target, resubmission of the INDCs, and setting the goal of 100% renewables and decarbonization by mid-century.

How do the Parties meet these targets and deadlines? By a robust finance mechanism. The INDCs can only be implemented if there is adequate financing that includes Loss & Damage. The billions pledged in Copenhagen and Cancun kept the developing country Parties at the table; now the call is to implement those mitigation and adaptation strategies to achieve decarbonization of the economy. This will come faster for some countries and slower for others depending upon their different capabilities. The collective financing proposed, which would include “all Parties in a position to do so”, is not the way to secure new financing. This, according to OxFam, is the equivalent of the developed countries “holding the money hostage on this issue.” The developing countries will contribute as they can, of course; but a vague reference too their obligation to do so has no place in the text.

What the developing Parties clearly articulated as a priority throughout last week’s negotiations, continues to threaten the stickiness of this Paris Agreement – the provision of finances to enable those countries to put their INDCs into effect. The developing Parties have fastened onto the idea of traditional differentiation and are washing their hands of the language that all Parties will contribute if “they are in a position to do so”. They will only cement a deal that has clear markers for capacity to contribute and places those responsible [the global North] as the major financiers of the efforts to stem climate change.

What’s next and who makes it happen at COP21?

Posted on December 7, 2015 by achristian

At COP21 on Saturday, December 5, the ADP transmitted the draft Paris Outcome (the Agreement, as we’ve called it all year) and its accompanying Decision to the COP. The text still contains many bracketed phrases (choices to be made), and there are key outstanding issues, such as on long-term goal, the timing of review of pledges, the provision of support to developing countries, loss and damage, and principles of equity and differentiation. (Be sure to see our posts from Week 1 for more details).

In its first action, the COP established the Comité de Paris (the Paris Committee), chaired by COP21 President, Laurent Fabius, to conduct informal consultations to facilitate achieving agreement by mid-week. These “informals” will cover thematic areas, and thus help to tackle cross cutting issue concerns such as differentiation, ambition, and adaptation/loss&damage. These launched on Sunday, and resumed today with closed meetings, along with bi-lateral meetings arranged by co-facilitators of each issue area to pursue compromise.

We will get a sense of the potential for progress at the Committee’s first Plenary tonight, where facilitators will share today’s outcomes by articulating their “assessment[s] of the possible concepts for solutions.”

The agreed upon facilitators, ministers from member Parties, are being paired for these consultations, and have received guidance from the COP President. Their mandate is clear: “Bridge differences with a focus on issues that require solutions to enable a timely and successful conclusion of the Paris Outcome.” And each duo has been given its “key issues.”

Stay tuned!

Riding the Wave of Divestment

Posted on October 7, 2015 by sara

Divestment is essentially the opposite of investment. The climate action group gofossilfree.org describes it as “getting rid of stocks, bonds, or investment funds that are unethical or morally ambiguous.” Generally speaking, institutions divest when they stop financially supporting specific entities because of the means by which those entities generate revenue. Divestment has been used as an advocacy device for many years, as a means of tackling the tobacco industry, sweat shops, and even apartheid in South Africa.

Divestment of fossil fuels began in 2012 with Bill McKibben’s climate change movement 350.org. Since launching this campaign against traditional fossil fuels, hundreds of organizations – beginning with universities and faith-based organizations, and expanding to municipalities, pension funds, and foundations – have committed to divesting from fossil fuels. In the last month the movement has reached a landmark $2.6 trillion divested. According to one study, 436 institutions and 2,040 individuals across 43 countries, together representing $2.6 trillion in assets, have committed to divest from fossil fuel companies.

Many types of investors have embraced fossil fuel divestment, both on the institutional and the individual level. High profile individuals have been particularly active in the divestment from fossil fuels. Specifically, actors like Leonardo DiCaprio and Mark Ruffalo have led the movement to cease investments in traditional fossil fuel companies. Their announcements have served as a means to show legislatures and CEOs alike that United States citizens are taking climate change seriously.

Rather than these red carpet personalities, universities have traditionally been at the forefront of divestiture movements. We continue this trend in Vermont, with many colleges and universities (including VLS) committing resources to exploring divestment opportunities. This has been an important method of expressing students’ and citizens’ dissatisfaction with traditional energy investments. It has also lent support to Vermont’s support of broader energy and climate change goals.

Some studies show that divestiture is not actually effective as an economic driver because it does not force major fossil fuel companies out of business or necessarily compel them to change their practices. Nevertheless, divestment may, in fact, be a smart financial decision, since other recent reports have warned of the negative financial consequences of holding large portfolios of fossil fuels. Additionally, it can have an important impact in terms of shaping national discourse. By bringing climate change issues into the media spotlight, the divestment movement helps to put pressure on the negotiating parties at COP21 in December.

COP15 coming to a close…

Posted on December 18, 2009 by ashleysantner

As the negotiations are coming to a close, a select number of world leaders are struggling to come to an agreement.

Here is a smattering of recent press:

World leaders come together to continue meeting

The world’s leaders have come together once again to move the climate negotiations forward, after having gathered in smaller groups during the afternoon. At the same time the UN conference continues in the form of large meetings. Barack Obama, Wen Jiabao, Ban Ki-moon and Fredrik Reinfeldt were among the speakers in plenary during the afternoon. Continue reading →

Powerful Statements from the Plenary

Posted on December 16, 2009 by Anna Ellis

I am not one of the three in our group in the plenary today, but I have been watching the live streaming for the past 4 hours. Various heads of states are now giving their 5-10 minutes statements. I just listened to the Prime Minister of Mali, Modibo Sidibe and the President of Venezuela, Hugo Chavez. Below are my hastily taken notes from their speeches (both through UN translators so these texts not the specific words of these leaders):

Photo source: Wikipedia

Mr. Sidibe – “I want to tell you a story about my relationship for the past 50 years with a river – the Niger river – I was born in the central delta on the banks of this river. I was 5 years old when my grandma warned me of swimming in this river b/c it was turbulent and deep. She said a city of water spirits lived down in the depths.

. Continue reading →

Negotiations Breakdown?

Posted on December 9, 2009 by Laurie Beyranevand

COP15 President Connie Hedegaard about to start 3pm meeting after suspension of the plenary re-opening the session

The morning started out with a flurry of activity. After some discussion about the logo and how certain parties felt it represented the end of Kyoto, the COP plenary commenced with the Tuvalu delegation proposing a contact group to review its protocol, which was proposed and tabled six months ago. As proposed, the Tuvalu protocol is a legally binding agreement meant to complement Kyoto through amendments, as well as the creation of a new protocol entitled the Copenhagen Protocol. In no uncertain terms, Tuvalu stated it was here to “seal the deal” and wanted nothing less than a legally binding document.

In response to the request for a contact group, many of the AOSIS countries expressed great enthusiasm noting they are the states most impacted by the effects of climate change. As Cape Verde stated, “we will be the first to diasappear…in this climate crisis.” Other countries strongly opposed the creation of a contact group, most notably, China, India, Saudi Arabia and Venezuela. The opposition was clear in expressing their feeling that the parties’ focus should not be on new texts. The United States was unsurprisingly quiet. Most alarmingly, however, countries within the G77 that had formerly been aligned were clearly divided. Continue reading →