The climate finance needs and goals are usually among the hottest topics debated during international negotiations and COP23 makes no exceptions in both negotiations and side events.
The U.N. summit taking place in Bonn opened the second and last week of talks with a full focus on opportunities and challenges to secure the pace and scale of investments consistent with the Paris Agreement’s long term goals, to be mobilized before and after 2020.
Negotiations sessions mostly concerns work plans of mechanisms and bodies in charge of managing and mobilizing financial flows for low carbon and resilience projects, such as the Green Climate Fund, the Standing Committee on Finance, the Global Environment Facility, and the Adaptation Fund. Among other topics, discussions got heated up especially about modalities and procedures for the Adaptation Fund (a Kyoto protocol’s legacy to the Paris framework) and transparency rules for reporting financial transfers.
On Monday (Nov. 13), the Global Climate Action program featured high level events on Finance for Climate, bringing together different stakeholders for discussing the way forward to step up climate financial flows.
Eric Usher, Head of UNEP Finance Initiative said: “At the heart of the climate challenge are two gaps we urgently need to bridge: the ambition and the investment gap”. “It is up to national governments now to increase the ambition of their NDCs to close the 17 GtCO2e emissions gap that we still face for 2030. When it comes to the investment gap, however, we need all financial players – public, private, domestic, international – and including markets and regulators, to work together effectively to mobilize at least USD 1.5 trillion of climate finance that is needed every year” Usher said.
One common denominator is that the economic benefits in stepping up climate action are acknowledged and investors’ appetite is growing. New research from the UN Environment Inquiry and the World Bank Group, released in Bonn, estimates that national pledges of only 21 developing countries open up an initial investment opportunity of USD22.6 trillion from 2016 to 2030 in key sectors. The report highlights that the transition toward a sustainable financial system is already taking place and the next two years will be crucial for sustaining the progress.
In Bonn several representatives of private investors, funds, industry and power utilities, such as Aviva, HSBC, Iberdrola, have stressed that climate change is an opportunity and pursuing low carbon investments can be not only an environmentally sound but also economically profitable choice. What prevents the private sector from scaling up investments mostly rely on two issues: reducing investment risk and mainstream carbon pricing. Both issues points to the role of governments in providing strong, consistent plans for implementing climate pledges and setting a predictable and stable regulatory framework that internalizes the cost of carbon emissions. Financial disclosure of climate risk, lowering cost of capital and supporting project preparation and planning are other key areas where public resources will make the difference, according to private sector representatives.
Also local authorities’ perspective highlighted the mismatch between climate finance’s needs and current investments on the ground. Representatives of local governments stressed their willingness to undertake the challenge of making regions and territories climate smart and resilient, but they highlighted the difficulty of accessing the resources needed. The two keywords recurring during the talks were “localization” of climate finance and capacity building, in terms of capacity to transform local plans into attractive investment opportunities.
Both groups of stakeholders stressed the benefits of increasing cooperation among the private sector, national and local governments, banks and multilateral funds. Mauricio Rodas Espinel, the mayor of Ecuador’s capital, said Quito is working with other local governments on an action plan that will involve all actors, to be presented at the climate finance summit held by the French government in December. The Climate Finance Day and the following “One Planet Summit” will take place on December 11-12 in Paris and will gather international organizations, foundations, banks, startups, national and local governments, city mayors and others to to discuss concrete options and strategies to accelerate the financing of the energy transition and adaptation to climate change.
(Image: Ain Beni Mathar Integrated Thermo Solar Combined Cycle Power Plant, Morocco. Photo credit: Philippe Roos /Flickr)