Our Common Future Under Climate Change

International Scientific Conference 7-10 JULY 2015 Paris, France

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Thursday 9 July - 17:30-19:00 UPMC Jussieu - Amphi 24

3310 - Climate finance at scale: emerging opportunities?

Parallel Session

Lead Convener(s): T.E. Downing (Global Climate Adaptation Partnership, Oxford, United Kingdom), A. Atteridge (Stockholm Environment Institute, Stockholm, Sweden)

Convener(s): H. Mcleod (KPMG, London, United Kingdom), R. Mechler (IIASA, Laxenburg, Austria), N. Thaven (Climate Technology Initiative - Private Finance Advisory Network, Winterton, KwaZulu Natal, South Africa), E. Adere (International Development Research Centre, Nairobi, Kenya)

Climate finance at scale: Overview of issues

T. E. Downing (Global Climate Adaptation Partnership, Oxford, United Kingdom), H. Mcleod (KPMG, London, United Kingdom)

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Climate finance at scale: Overview of issues

TE. Downing (1) ; H. Mcleod (2)
(1) Global Climate Adaptation Partnership, Oxford, United Kingdom; (2) KPMG, London, United Kingdom

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Climate finance is essential to reducing climate risks, and is at the heart of the UNFCCC’s climate regime. Engagement with the private sector goes beyond the expectation of finance for public funds or protection against expected losses and damages. Transformation of climate resilience requires leadership in a range of private sector forms of investment and sustainability. Emerging examples of how research has informed improved access to climate finance address fundamental questions. How can research inform private sector investments in adaptation? What are the barriers limiting the scaling up of successful pilot interventions? How can adaptation plans of implementing entities be informed by research? What is the business proposition for private sector investment?

Climate finance at scale: emerging opportunities?

A. Atteridge (Stockholm Environment Institute, Stockholm, Sweden)

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Climate finance at scale: emerging opportunities?

A. Atteridge (1)
(1) Stockholm Environment Institute, Stockholm, Sweden

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Climate finance is essential to reducing climate risks, and is at the heart of the UNFCCC’s climate regime where developed countries have pledged to mobilize US$100 billion of climate finance per year from 2020 onwards. In parallel this year, the Post-2015 process to negotiate the Sustainable Development Goals, the Financing for Development Conference in Addis Ababa, and the Third United Nations World Conference on Disaster Risk Reduction will also agree on new financial commitments and/or principles for providing support to developing countries. While the question of how to mobilise funds is crucial, the equally important question of how to ensure their effective use has been given far less attention. At present, these different flows are governed and delivered separately, across a fragmented finance architecture, and this among other factors creates problems for using limited financial resources effectively. There is scope for much greater alignment of international public finance for development, climate change and other goals (such as for disaster risk reduction or environmental management), and yet also challenges to achieving greater alignment. What are the opportunities for post-2015 governance of climate finance in this broader context?

Climate finance at scale: emerging opportunities?

R. Mechler (IIASA, Laxenburg, Austria), T. Schinko (IIASA, Laxenburg, Austria)

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Climate finance at scale: emerging opportunities?

R. Mechler (1) ; T. Schinko (2)
(1) IIASA, Risk, Policy, Vulnerability, Laxenburg, Austria; (2) IIASA, Risk, Policy, and Vulnerability Program, Laxenburg, Austria

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Climate finance is essential to reducing climate risks, and is at the heart of the UNFCCC’s climate regime where developed countries have pledged to mobilize US$100 billion of climate finance per year from 2020 onwards. In parallel this year, the Post-2015 process to negotiate the Sustainable Development Goals, the Financing for Development Conference in Addis Ababa, and the Third United Nations World Conference on Disaster Risk Reduction will also agree on new financial commitments and/or principles for providing support to developing countries. While the question of how to mobilise funds is crucial, the equally important question of how to ensure their effective use has been given far less attention. At present, these different flows are governed and delivered separately, across a fragmented finance architecture, and this among other factors creates problems for using limited financial resources effectively. There is scope for much greater alignment of international public finance for development, climate change and other goals (such as for disaster risk reduction or environmental management), and yet also challenges to achieving greater alignment. What are the opportunities for post-2015 governance of climate finance in this broader context?

Impact Investing and unlocking Private Sector finance for climate change adaptation in Sub-Saharan Africa

T. Naidoo (Climate Technology Initiative - Private Finance Advisory Network, Winterton, KwaZulu Natal, South Africa)

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Impact Investing and unlocking Private Sector finance for climate change adaptation in Sub-Saharan Africa

T. Naidoo (1)
(1) Climate Technology Initiative - Private Finance Advisory Network, Winterton, KwaZulu Natal, South Africa

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Abstract for “Our common future under climate change”

 

There is growing consensus that with even the most rigorous of efforts to mitigate climate change it is likely that we will have to adapt to a changing climate, and that the countries least responsible for causes will bear the greatest burden. The cost estimates for adaptation vary, with more recent estimates indicating a three-fold increase in the finance required. Despite the variance, it is clear that current sources of public finance fall far short of the required resources, and that the private sector has a role to play in providing some of the required finance.

The private sector however has its own requirements for investment and many adaptation projects will not be able to respond to the return on investment, stage of development or scale requirements of investors. CTI PFAN, the Climate Technology Initiative's Private Finance Advisory Network has shown its ability to raise private sector finance for climate change mitigation, having raised in the region of $600 million to date. It is now trying to replicate this success for adaptation, supported by IDRC, and at its last Investor Forum in Johannesburg in November 2014, was able to showcase adaptation projects from Africa which have the ability to respond to some of the demands of private sector finance, with projects from multiple sectors, including water, agriculture, real estate, tourism and microfinance, at various stages of development, and various scales. Twelve projects were showcased to investors, each of which represents both public and private goods, but with in-built social and environmental credentials.

There are trillions of dollars being invested annually by the private sector and the growing call for responsible investment is part of the stimulus for the growing sector of Impact Investing. Organizations such as “100% Impact,” have shown that pure impact investments have the ability to match the returns of conventional investments. Whether the investment community is aware of project categorization as mitigation, adaptation or just good development is a moot point.

The Impact Investment community represents a high potential source of private sector finance for supporting adaptation actions if the adaptation projects can demonstrate their ability to quantify their impact. The current CTI PFAN adaptation work is thus paired with a research component, managed by the Frankfurt School, which, amongst other issues such as an assessment of the policy environments and risk analysis is also looking at the metrics of adaptation.

To secure some of these private sector funds for adaptation activities, the relationship between adaptation projects and the impact investment community needs to grow, and there are four key issues which the current CTI PFAN project aims to address to achieve this:

  1. The development of a pipeline of investment grade projects;
  2. The leveraging of public funds to generate investment tipping points and to create a market of these types of investments;
  3. Mechanisms to bring these projects into view so that they become part of the available options for investment;
  4. Developing metrics for assessing adaptation activities.

 

Thaven Naidoo

CTI PFAN Africa Adaptation Coordinator

Thaven.naidoo@ppl-int.com / +2783 439 7968

Private finance for adaptation: do private realities meet public ambitions?

P. Pauw (German Development Institute, DIE, Bonn, Germany)

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Private finance for adaptation: do private realities meet public ambitions?

P. Pauw (1)
(1) German Development Institute, DIE, Bonn, Germany

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The private sector’s role in climate finance is increasingly subject to political and scientific debate. Yet there is poor empirical evidence of private finance for adaptation and its potential contribution to the industrialised countries’ mobilisation of USD 100 billion of annual climate finance from 2020 onwards to support developing countries to address climate change. Building on earlier research (e.g. on the private sector's role in adaptation in NAPAs and Zambia's agricultural sector), we will present a paper on an analysis of 101 case studies of private sector adaptation under the Private Sector Initiative (PSI) of the UNFCCC Nairobi work programme. The case studies are examined against ten ‘adaptation finance criteria’ that were distilled from UN climate negotiation outcomes.

Results show that private adaptation interventions complement public adaptation activities all over world, including in priority sectors in developing countries such as water and agriculture. Yet the ten adaptation finance criteria are not met, which demonstrates that the diplomatic UNFCCC conceptualisation of adaptation finance is dissonant from the private sector reality. For example, only a minority of the case studies takes place in the `prioritised’ most vulnerable developing countries.  And while the case studies' investments are 'new and additional' to Official Development Assistance (ODA), their 'predictability' remains unclear. And despite some commitment for 'up-scaling', plans and associated costs for doing so remain undisclosed. Developed countries' role in 'mobilising' private financial resources under the PSI seems limited.

The presenters will provide options for minor improvements to bring the private realities closer to public ambitions. Yet it is unrealistic to expect that the UNFCCC alters existing adaptation finance criteria to suit private initiatives better, or that the private sector aligns its initiatives to meet the UNFCCC criteria. We therefore advocate strict monitoring and reporting only of private investments that principally aims to finance adaptation. This practical way forward would allow private finance to meet criteria such as predictability, transparency, and mobilisation, but would drastically reduce the amount of private investment that could contribute to reaching the USD 100 billion climate finance target, which would have major political implications.

Panel discussion:

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Panel discussion:
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Dr Aaron Atteridge, Stockholm Environment Institute, aaron.atteridge@sei-international.org

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Dr Aaron Atteridge, Stockholm Environment Institute, aaron.atteridge@sei-international.org
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Ms Helena McLeod, KPMG, South Africa, hmcleod@kpmg.co.ke

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Ms Helena McLeod, KPMG, South Africa, hmcleod@kpmg.co.ke
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Dr Reinhard Mechler, IIASA, Austria, mechler@iiasa.ac.at

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Dr Reinhard Mechler, IIASA, Austria, mechler@iiasa.ac.at
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Mr Thaven Naidoo, Climate Technology Initiative--Private Finance Advisory Network

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Mr Thaven Naidoo, Climate Technology Initiative--Private Finance Advisory Network
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