Core Principals of Climate Finance to Realize the Paris Agreement
Stephen Gold is Global Head – Climate Change, at UNDP Bureau for Policy and Programme Support
UNITED NATIONS, Jan 29 2016 (IPS) – The Paris climate change conference brought together 197 countries and over 150 Heads of State – the largest convening of world leaders in history – to agree on measures and work together to limit the global average temperature rise.
While world leaders and the Agreement they adopted recognize climate change as one of the greatest development challenges of this generation and of generations to come, we are now faced with the next, more difficult step: to raise and wisely spend the money that is needed for us to act.
During my discussions with countries in Paris last month, I listened to concerns expressed by dozens of developing country government representatives about the challenges they face in securing the necessary financing. This is a significant challenge; while countries outlined their Paris Agreement climate targets on mitigation and adaptation via the ‘Intended Nationally Determined Contributions” or “INDCs”, turning these targets into actionable plans requires financing.
To help frame this challenge, three key principles for catalyzing and supporting access to climate finance for sustainable development must be considered.
First, climate finance should be equitable. We must ensure that resources are available to all developing countries who need it. Likewise all segments of the populations, women and men, including from indigenous groups within those countries, should be able to participate and benefit.
Second, it should be efficient, in that public finance must be used to maximize its potential and to bring about far larger sums of finance, particularly in private investment. UNDP helps countries to access, combine and sequence environmental finance to deliver benefits that address the Sustainable Development Goals, including poverty reduction, energy access, food and water security, and increased employment opportunities.
This includes support for diversifying livelihoods through agricultural practices that are more resilient to droughts and floods, improving market access for climate resilient products, disseminating weather and climate information through mobile platforms, and improving access to affordable energy efficient and renewable energy sources.
Third, it should be effective by being transformational and strengthening capacities so that climate and development goals can be achieved in an integrated manner. To make a sufficiently profound impact that moves toward a zero carbon economy, countries know they will need to effectively use the limited public climate finance available in a catalytic manner, so as to secure wider-scale finance from capital markets in a meaningful and sustainable manner. This can include taking significant actions to address existing policy barriers and regulatory constraints to investment that will help create investment opportunities.
UNDP has for example, supported such measures in Uruguay and Cambodia, encouraging affordable wind energy and climate-resilient agricultural practices respectively. This is not to say that institutional investors alone will or should provide a magic bullet for climate-friendly investment. However, there may be opportunities for institutional investors to make climate-smart investment a part of their portfolios while meeting government development objectives somewhere in the middle.
Following these three principles are by no means a guarantee of success, however adhering to them will strengthen our efforts substantially. The evolving climate finance landscape provides new opportunities for countries to strengthen their national systems and incentive mechanisms to attract the needed finance at the international, regional, national and sub-national levels.
Through our collective adherence to the key principles of equity, efficiency and effectiveness, more countries will be more likely to access the finance they need to achieve their development goals, including those outlined in the Paris Agreement.
There is no more critical time than now to act. 2016 is a pivotal year that will set the stage for inter-governmental action on climate change in response to the Paris Agreement, the Sustainable Development Goals and other global agreements for years to come. This is a once-in-a-generation opportunity to transform the sustainable development agenda and to support countries with the resources and tools they need to achieve their goals.
These processes can create the right frameworks to unlock and access scaled-up resources. They also provide a unique opportunity to set new goals and objectives for the global development community, incentivizing innovative approaches, helping to foster gender equality and supporting long-term sustainable development.
Let us ensure we have sufficient resources to undertake the actions needed, and let us make sure we use those resources wisely so that we achieve success.