Private sector investments are shifting to address Climate Change

Private sector investments are shifting to address the challenges posed by climate change.

This trend could accelerate if governments and policy-makers take further actions to increase the demand for low-carbon, climate resilient investment, according to a report released by the United Nations Secretary-General’s Climate Change Support Team.

The new report, “Trends in Private Sector Climate Finance,” found that the private sector had made significant strides in response to the challenge posed by climate change since the 2014 Climate Summit in New York, where a range of finance sector including leaders from banks, pension funds, insurers and asset managers announced a series of high-profile commitments and targets to increase climate finance.

The report argues that the private sector has led the effort so far, but that now it is time for the policy makers to take action in order to accelerate the pace of private sector investment and engagement.

The report was presented to finance ministers at a special gathering in Lima, Peru that was jointly convened by France and Peru at the margins of the Annual Meetings of the World Bank Group and the International Monetary Fund.  It is a major milestone meeting, coming just over a month before countries meet in Paris to conclude a universal climate change agreement.

According to the new report, not only are most of the commitments made by the private sector at the Summit on track to being realized, moreover, hundreds of billions of dollars have been invested since the Summit to support low-carbon and climate-resilient investments in all parts of the world.

The increasing drive by the private sector, in both developed and developing countries is one of a series of trends that will help reduce emissions and improve climate resilience while providing energy, reducing air pollution and delivering a host of other benefits.

The report lists five inflection points that are signaling long term shifts. In addition to direct investments by the private sector, there has been the creation and expansion of the green bond market, which will issue between US $50-70 billion for climate finance in 2015.

Other shifts include: the increased application of internal carbon pricing by companies that will determine investment opportunities; increased concern around the activities of carbon-intensive assets and companies; and the sustained scaling up of efforts by the insurance sector to respond to the climate impacts that are already locked in.

The report also highlights that despite these long-term signals, serious gaps remain. Low-carbon investments remain insufficient to put the world on a less than 2°C degree pathway, particularly in the developing countries, despite a finding that investment in renewables in emerging and developing countries are outpacing that of OECD members.

While the public sector has a vital role to play to help the world reorient itself to a low-carbon, climate-resilient future, the report concluded that the bulk of the financing and insurance driving the much needed transition will be provided by the private sector.

UN Secretary-General Ban Ki-moon told the 70^th Session of the UN General Assembly in September that “Climate finance will be crucial,” and he urged developed countries to meet the agreed goal of $100 billion per year by 2020.

The report does not address the ongoing negotiations within the UNFCCC as to what constitutes climate finance or on what should be counted towards the goal of mobilizing $100 billion a year by 2020 to address the needs of developing countries. Rather, it provides details on the progress made on the commitments and targets set by the private sector and the changes in the financial markets that are emerging.

The report states that the private sector has emerged more fully as a partner since the 2009 Climate Conference in Copenhagen. Action in the finance sector coalesced, and received a substantial boost, at the 2014 Climate Summit, which was “born of a recognition that the UN itself needed to change in order to facilitate the economic transition,” and aimed to bring together all actors with a role in addressing climate change to catalyze creative ideas and engender new partnerships.

Global Commission finds better economic growth can close emissions gap

A new report released by the Global Commission on the Economy and the Climate has identified ten key economic opportunities that could close up to 96 percent of the gap between business-as-usual emissions and the level needed to limit dangerous climate change.

The report calls for stronger cooperation between governments, businesses, investors, cities and communities to drive economic growth in the emerging low-carbon economy.

“This report shows that success is possible: we can achieve economic growth and close the dangerous emissions gap,” said former President of Mexico Felipe Calderón, Chair of the Commission. “Today’s report shows us that a goal we once thought of as distant is within our reach. We can achieve global prosperity and secure a safe climate together. The low carbon economy is already emerging. But governments, cities, businesses and investors need to work much more closely together and take advantage of recent developments if the opportunities are to be seized. We cannot let these opportunities slip through our fingers.”

The new report, Seizing the Global Opportunity: Partnerships for Better Growth and a Better Climate, shows how recent trends in the global economy – such as the dramatically falling cost of clean energy, the continuing volatility of oil prices, and the worldwide growth of carbon pricing – are building momentum for low-carbon development.

“More and more countries are committing to integrating climate action into national economic plans, from the recent G7 statement on the need to decarbonise the economy by the end of the century, to the development of low-carbon and climate resilient growth strategies in a number of developing and emerging economies”, said Lord Nicholas Stern, leading economist and Co-chair of the Commission. “Strong economic growth that is also low-carbon is going to be the new normal.”

The Commission’s 10 recommendations include: 

Scaling up partnerships between cities, like the Compact of Mayors, to drive low-carbon urban development. Investment in public transport, building efficiency, and better waste management, could save around US$17 trillion globally by 2050.

Enhancing partnerships such as REDD+, the 20x20 Initiative in Latin America, and the Africa Climate-Smart Agriculture Alliance to bring together forest countries, developed economies and the private sector to halt deforestation by 2030 and restore degraded farmland. This would enhance agricultural productivity and resilience, strengthen food security, and improve livelihoods for agrarian and forest communities.

Governments, development banks and the private sector should collaborate to reduce the cost of capital for clean energy, with the goal of investing US$1 trillion in developed and developing countries by 2030.

The G20 should raise energy efficiency standards in the world’s leading economies for goods such as appliances, lighting, and vehicles. Investment in energy efficiency could boost cumulative economic output globally by US$18 trillion by 2035.

Action to reduce emissions from aviation and shipping under international treaties and from hydrofluorocarbons (HFCs) under the Montreal Protocol could reduce emissions by as much as 2.6 Gt in 2030. In shipping alone, higher efficiency standards are expected to save an average of US$200 billion in annual fuel costs by 2030. 

The Commission calculates that its recommendations could achieve up to 96 percent of the emissions reductions in 2030 that are needed to hold the rise in global temperature to under 2°C, the level which governments have pledged not to cross. 

The report finds that businesses are already driving a growing US$5.5 trillion global market for low-carbon goods and services. It calls for new business partnerships to open new markets, share costs, and reduce concerns about the international competitiveness impacts of climate policy. 

“Businesses are already preparing for a low-carbon future, and in many ways are ahead of the curve. For instance, companies representing 90 percent of the global trade in palm oil, including ours, have committed to deforestation-free supply chains by 2020”, says Paul Polman, CEO of Unilever. 

The Commission argues that the actions identified in Seizing the Global Opportunity would enhance the national pledges (“Intended Nationally Determined Contributions,” or INDCs) already being submitted by countries to the UNFCCC for the Paris climate conference. It urges INDCs to be seen as “floors, not ceilings” to national emissions reduction targets. 

“We know that the current INDC pledges are not likely to get us to the 2°C world we need. But this report shows there is significant room for stronger action that is in countries’ economic self-interest,” said Michael Jacobs, Report Director, New Climate Economy. “It is therefore vital that the Paris climate agreement sets in motion a regular process for strengthening national commitments, on the way to the long-term goal of reducing emissions to near-zero in the second half of this century.” 

“This report highlights the huge opportunity countries now have to scale up climate action while also driving growth and development,” said Helen Mountford, GlobalProgramme Director of the New Climate Economy. “Global economic growth and carbon emissions are beginning to be decoupled: last year, for the first time in decades, emissions held steady while the global economy grew. But the pace of change needs to be accelerated if we are to meet our development goals and also reduce climate risks.” 

 

Seizing the Global Opportunity is a follow-up to Better Growth, Better Climate: The New Climate Economy Report, which was released in September 2014. The Global Commission is made up of 28 leaders in the fields of government, business and finance from 20 countries. 

Find out more, read the report and executive summary, here: http://2015.newclimateeconomy.report/

Private sector gets conscious of climate change developments

Change has been identified as one of the major challenges to sustainable growth and development in developing economies like Ghana.

Businesses are as vulnerable as local communities to the negative effects of the changing climate – extreme weather conditions affect food production, forests and human health which have implication for businesses.

The Business Sector Advocacy Challenge (BUSAC) Fund has over the years provided grants for the private sector to undertake advocacy actions to contribute to the improvement in the business environment.

The Fund, in the next couple of years, is turning to capacity building in climate change adaptation and mitigation activities, in addition to its business advocacy.

“We have throughout all our grants noticed that businesses are being affected by climate change and that there is an increasing focus from government and donor community on looking at climate change issues and there are a number of advocacy issues which have clear climate change implications that we could help our grantees with”, noted Nicolas Gebara, Fund Manager at BUSAC Ghana.

Beneficiary grantees are supported in the areas bush fire burning, cutting of economic trees and renewable energy sources.

The Private Enterprise Federation (PEF), an umbrella body for the promotion of private sector interests in Ghana, has provided a platform for various private and public sector stakeholders to discuss developments and challenges on how the private sector can take advantage of business opportunities in the green economy.

Under its ‘Mapping of Environmental and Climate Change Projects in Ghana’, the Federation is seeking to undertake proper mapping-up of climate change interventions to help the private sector take advantage of the business opportunities through coordinated partnerships and easy access to information.

With support from the Konrad Adenauer Stiftung (KAS), the Federation seeks to accomplish its target by mapping out all climate change and environment stakeholders and their activities; creating a momentum for networking and awareness creation on climate change and the environment; stimulating real investment in climate change and environment led by the private sector ; and creating the opportunity for business-to-business dialogue on climate change and environment – a nexus of the private sector and climate change.

Ghanaian businesses can explore opportunities in development innovations for climate-smart agricultural production and value addition, engage in tree plantations to tap into carbon financing, establish green estates and generate efficient energy options.

According to Mr. Gebara, there are opportunities for private sector businesses by “interacting more at the international level to get source of finances that can provide the resources to put into programmes that combat climate change.”

He observed a high level of awareness of climate change among private sector interest groups which can be translated into action.

“The policy is there and there is the clear need now to implement that policy and implement an action plan in order to start to combating climate change and adapting to climate change to secure food and secure livelihood of the Ghanaian people,” said the BUSAC Fund Manager.

The National Climate Change Policy was launched in July 2014 to reflect Ghana’s Shared Growth Agenda, a blueprint for national development.

Story by Kofi Adu Domfeh