As we race towards 2020 and the so-called “Decade of Implementation”, the annual gathering in New York for the UN General Assembly and Climate Week was busier than usual and heavy with expectation.
We saw a flurry of announcements from governments – including several commitments to carbon neutrality by 2050 – alongside a series of initiatives put forward by business, financial institutions and civil society to tackle the climate crisis. Youth strikes all over the world called on governments to act now and act faster. The sense of urgency was stronger than ever. But are all these announcements and commitments going to add up to something meaningful?
Five key themes stood out for us during Climate Week, which we believe will be critical to delivering the SDGs during the next decade, and will help shape our work in 2020 and beyond:
Nature Based Solutions
With more than 125 events during the week and more than 150 initiatives announced, it is clearer than ever that governments and businesses are ready to capitalise on nature-based solutions to deliver one third of the emissions reduction needed to meet the Paris Agreement targets.
The launch of the Food and Land Use Coalition’s Global Report “Growing Better” saw natural solutions such as regenerative agriculture, restoring landscapes and securing a healthy ocean as critical transitions to transforming food and land use systems that deliver better environmental, economic and social outcomes. These present up to $1 trillion in new business opportunities, cover approximately one third of the additional investment requirements and can help mitigate nature-related risks in current portfolios.
With the upcoming Convention in 2020, biodiversity is increasingly being integrated in the climate agenda with initiatives such as the “One Planet Business for Biodiversity” highlighting the risks foreseen by food and ag companies and financiers around biodiversity loss for food production and the recognition of placing nature at the centre of food systems and production.
Is a Task Force for Nature-related climate disclosures on the horizon?
2. Resilience and adaptation
Recognising the climate impacts that even a 1.5 degree scenario will have, particularly on the most vulnerable, work is being advancing on resilience and adaptation, including on the development of innovative financial models to mitigate physical climate risk, especially for cities and coastal areas.
The Global Commission for Adaptation released its flagship report identifying 5 key areas of investment and priority actions it will look at advance over the next year. For financial institutions it will be critical to support governments and companies in better understanding risks and how to incorporate them into decision-making to increase the flow of capital to resilient investments.
Some institutions are already leading: the European Bank for Reconstruction and Development launched the first Resilience Bond for US$700m; the CEO of Willis Tower Watson presented a new private sector-led Coalition for Climate Resilient Investment at the Climate Action Summit; the World Bank, the Bill and Melinda Gates Foundation, and several governments including the EU, the UK, Germany, Sweden, Switzerland and Norway committed over US$790 million to enhance resilience of over 300 million small-scale food producers.
What are the new business models for private-public partnerships around climate-related insurance?
3. Scaling up sustainable finance
The finance community continues its upward trend in integrating sustainability across its mainstream operations. An inspiring event hosted by HSBC at the New York Public Library debated topics from sustainable supply chain financing to regulation, block chain and blended finance, with speakers such as Kathleen MacLaughlin, Executive Vice President and Chief Sustainability Officer of Walmart, Sonja Gibbs, Managing Director and Head of Sustainable Finance at IIF, Mary Shapiro, Vice Chair for Public Policy at Bloomberg, Sofie Blakstad, Lead Researcher for Sustainable Digital Finance Alliance and Alzbeta Klein, Director and Global Head, Climate Business at the IFC.
Announcements and initiatives of note included:
i. the Principles for Responsible Banking launched by 130 banks representing US$47 trillion in assets. The Principles provide a voluntary framework for sustainable banking and promote alignment of banks’ strategies with the SDGs and Paris Agreement, transparency and accountability, and target setting and progress to monitor adherence to the Principles
ii. further decarbonisation commitments from asset owners with the launch of the Net-Zero Asset Owner Alliance representing more than US$2 trillion under management committing to align portfolios with a 1.5 degree scenario as part of the Mission 2020 campaign. The United Nations Joint Staff Pension Fund also announced divestments in publicly traded companies in the coal energy sector by 31 December 2020, following several other investors and financial institutions in the divestment movement.
iii. Multilateral Development Banks (MDBs) have pledged to jointly raise US$175 billion in climate finance by 2025, combining a 50% raise of current MDB allocations to $65 billion for both adaptation and mitigation (with at least US$50 billion for low and middle income economies), and mobilisation of a further US$110billion, US$40 billion of which from the private sector. We expect higher figures for private sector participation could be targeted with more engagement and better data disclosure as blended finance transactions increase in number and sector coverage.
Are the commitments ambitious enough and is there enough pipeline to meet them?
4. Leadership from the private sector
The Summit witnessed important new voices from youth but also increasing leadership from a wider base of corporate sectors.
The World Travel and Tourism Council hosted its first ever Climate Conference and there was a strong focus on the climate impact of Fashion at F4D’s “First Ladies Luncheon” (fashion produces more man-made emissions than aviation and shipping together). This played into the strong focus on what we eat, what we wear and how we travel, urging all of us to reflect on how our own consumption patterns are major drivers of the climate emergency.
The Climate Finance Leadership Initiative (CFLI) launched its “Financing the Low-Carbon Future” report, focusing on the leadership opportunity of finance and private sector actors to close the climate finance gap.
93 business and increasingly in hard to abate sectors such as shipping, cement and steel have committed to carbon neutrality by 2050 and to develop net-zero commercial options for these industries by 2030, led by the Energy Transitions Commission “Mission Possible” findings. 87 business have committed to implement the 1.5 target throughout their operations and value chains.
What are the main market infrastructure and data gaps to implement the vision?
5. Blended finance for the SDGs
The latest data on the state of blended finance shows a growing momentum around “better blending” initiatives, with agriculture and conservation transactions gaining more interest.
In the field, there were important new pledges to the Green Climate Fund (GCF), including doubling commitments from countries such as Sweden and the UK, reaching US$7.4 billion, paving the way for more contributions at the pledging conference in Paris at the end of October, although still not close to the original US$100 billion target. Despite critiques over a cumbersome implementation model, the GCF is expected to leverage private sector towards adaptation and mitigation through a variety of instruments including grants, guarantees and concessional loans.
The Tri Hita Karana event in partnership with the Indonesian Ministry of Foreign Affairs and the Blended Finance Taskforce saw the continued commitment of the Indonesian Government to place blended finance at the centre of its sustainable development agenda, by promoting transactions such as the Tropical Landscape Financing Facility and the SDG Indonesia One platform, and the launch of the ABAC-UNDP social impact fund.
Finally, new partnerships are also being brokered to advance public-private collaboration across climate finance in emerging markets: the CFLI has partnered with the Association of European Development Finance Institutions (EDFI) to build project pipelines, manage risks and broaden private sector investment in emerging markets.
How can blended finance be standardised and scaled to shift largescale capital to emerging markets?
Want more? See reflections from the Chair of the Blended Finance Taskforce, Jeremy Oppenheim here,