Fifty Shades Greener: An Overview of the Past, Present and Future of Climate Financing
Combating climate change is inevitable and one of the tools we are using today is Climate Financing. This is a blend of public and private funds sourced from multilateral or bilateral agencies and examples include Africa Risk Capacity and the Green Climate Fund. Through Climate Finance projects ranging from Sunshine Schools in China to the water sector improvement project in Andhra Pradesh, India; an initiative seeking to replace natural gas with renewable energy in Belarus, to a project supporting community forestry in Mexico have been implemented. These projects are some of the many ways climate finance is helping lower global carbon emissions, reduce poverty and improve local economies in the world.
I first learnt about Climate Change during an International Relations lecture in my third year at Uni. It was in that class that I learnt that this was not just an environmental issue but one linked to socio-economic development of the world. With a piqued interest and a yearning to explore further on this interconnection I decided to write my thesis on the Politics of Climate Change as an emerging threat to international peace and security.
Over a decade later the narrative has seemingly evolved. We have drifted from an emerging to actual threat as we are now confronted with temperature spikes and sea level rises; natural disaster and changes in weather patterns. Climate change is now acknowledged by a growing population as hindrance to the socio-economic development and survival of all people. Least Developed Countries (LDCs) are the most vulnerable and least prepared for the effects of climate change.
It is on this premise that 20 finance ministers from low and middle income economies vulnerable to climate change have come together to form the V-20 based on their shared challenge and identifying the need to mobilize public and private funds. On a broader spectrum, the United Nations Framework Convention on Climate Change (UNFCCC) is a collaboration of governments of the world to address the emission of Greenhouse Gases and build climate resilient structures. Its supreme body, the Convention of Party, meets once a year to assess progress.
Concerted efforts have ignited conversations and debates, formed the foundation for the formulation and implementation of policies and plan to address climate change. Through these structures resources have been allocated to forest protection, building resilience to climate change and providing clean energy to millions across the world. On paper, the rationale of channeling funds to tackle the unmanageable and manage the unavoidable is commendable. It shows that the world is headed in the right direction by availing the poorest countries the opportunity for a clean and sustainable development path.
However, this comes with a myriad of challenges, some of which were identified by Dr. Hanne Knaepen (@hanne_tweets). She identified lack of transparency, no internationally agreed definition of the concept, fragmented structures and lack of inclusivity amongst others as issues plaguing progress. Beyond her analysis one that easily comes to mind is that developed countries may not fulfill their commitment to funding the Green Climate Fund evident by America’s withdrawal from the Paris Agreement.
These challenges call for innovative solutions. For instance, we may consider building a framework that includes multinational companies (MNC) as part of climate finance structure. According to the Fortune 500 website, the global 500 companies generated revenue of $27.7 Trillion and profit of $1.5 Trillion in 2016. The number 1 company on the list Walmart has revenue of over 400 Billion USD. This is about double the GDP of Bangladesh and about ten times that of Ghana. In the world, today with companies wielding more financial and technological advancement than some countries, including them to the structure could be another angle to view and propose climate financing.
We could agree on a mix of debt and Official Development Assistance (ODA). The debt would be long term instruments for green projects in emerging economies where the MNC may or may not have vested interests while ODA can be earmarked for the most vulnerable and/or poorest of countries as part of its Corporate Social Program which can transcend beyond country of origin if truly the world is a global village. In exchange for this, tax benefits can be granted.
For this to work, countries in the developing country also have a crucial role to play. In his
penned in the Daily Star, Saleemul Huq discussed the need for transparency, accountability and good practice of climate funding. Recipients of funds will need to put structures in place to compete and access the pool of funds. This is much needed to provide a level of assurance that the funds are channelled into projects that help us combat climate change and build resilient cities. Availability of information as evidenced on the Green Climate Fund website should be emulated by countries who are recipients of climate funding for the public to track, assess and report on progress of projects in their region. As we embark towards issuing our first Green Bonds in Nigeria, these lessons should be adopted to ensure that success is achieved and investor confidence stays afloat and we the public can monitor the projects funded.
We have come a long way since the Rio Declaration on the Environment and Development set the conceptual framework for environmental sustainability and how the threat of climate change will be dealt with today. The Impact Stories shared by the International Finance Corporation (IFC) is a testimonial of how effective Climate Financing is when applied properly. Whether it is empowering farmers in Nepal by promoting early adoption of climate smart practices such as water management and resilient seeds or providing clean energy through the Tofila Wind Farms in Jordan, Climate Finance could be the future of debt, equity and ODA for the world.
We have come a long way but we have a longer road to tread and we need to hasten our steps too. This involves creating a possible broader scope of actors to contribute the green pool and building a transparent framework for us to track and monitor projects at the grassroots level. Putting these structures in place may not be the totality of our solutions as there will surely be glitches and hitches along the way but this will lead us closer to dealing with a challenge whose ripple effect collectively affects us all.