European investors hold shares worth at least $65 million in major coal firms across China, India, the United States, Indonesia and South Africa within funds designated as “promoting environmental and social” goals under EU rules, an analysis by Climate Home and media partners found.

Taken together, these companies emit around 1,393 million tonnes of carbon dioxide (CO2) into the atmosphere every year, putting them among the world’s top five polluters if they were a country.

The investments are owned by major financial firms including BlackRock, Goldman Sachs and Fideuram, a subsidiary of Italy’s largest bank Intesa Sanpaolo. Most firms analysed are signatories of the Glasgow Financial Alliance for Net Zero (GFANZ), whose members pledge to align their portfolios with climate-friendly investment.

The asset managers told Climate Home their coal holdings do not contradict EU green policies or the 2015 Paris Agreement to tackle climate change.

At the COP26 UN climate summit in Glasgow in 2021, countries agreed for the first time to accelerate efforts “towards the phase-down of unabated coal power”. “Unabated” means power produced using coal without any technology to capture, store or use the planet-heating CO2 emitted during the process.

But rather than shrinking, global coal capacity has grown since the signing of the Glasgow Climate Pact with a fleet of new coal plants firing up their boilers, primarily in China, India and Indonesia. Coal miners in those countries have also boosted their operations to keep up with the increasing demand.

European leaders have heavily opposed this, with EU president Ursula von der Leyen saying the bloc is “very worried” about coal expansion in China.

“Light green” funds

The investments analysed by Climate Home have been made by funds classified under Article 8 of the EU’s Sustainable Finance Disclosure Regulation (SFDR), which the European Commission hoped would discourage greenwashing and promote sustainable investments when it was introduced in 2021.

Article 8 – known as ‘light green’ – refers broadly to a fund that has “environmental and social characteristics”, while the ‘dark green’ Article 9 refers more directly to sustainability.

The rules were also intended to offer members of the public more clarity on where asset managers invest their money and enable them to make an informed decision on whether they want their savings or pension pots to prop up climate-harming activities.

Workers shovel coal onto a truck at a coal yard near a coal mine in Huating, Gansu province, China. REUTERS/Thomas Peter

But a group of European financial market watchdogs warned this month the rules are having the opposite effect and called for an overhaul of the system.

“Status as ‘Article 8’ or ‘Article 9’ products have been used since the outset in marketing material as ‘quality labels’ for sustainability, consequently posing greenwashing and mis-selling risks,” they said in a joint opinion to the European Commission.

“The general public is still being misled when it comes to sustainable funds,” Lara Cuvelier, a sustainable investments campaigner at Reclaim Finance, told Climate Home. “The regulations are very weak and there is no clear criteria as to what can or cannot be included. It’s still in the hands of investors to decide that for themselves.”

Funding coal expansion

Climate Home identified investments in the biggest-polluting companies in the coal sector as part of a wider investigation led by Voxeurope, which tracked holdings by funds that disclose information under the EU’s sustainable finance directive.

These “green” funds include investments in mining companies like Coal India and China Shenhua – the respective countries’ top coal producers – and Indonesia’s Adaro Energy, as well as in giant coal power producers such as NTPC in India and China Resources Power Holdings.

All of these companies are planning large-scale expansions of their coal output, according to the influential Global Coal Exit List compiled by German NGO Urgewald.

No new coal mines, mine extensions or new unabated coal plants are needed if the world is to reach net zero emissions in the energy sector by 2050 and keep the 1.5C warming limit of the Paris Agreement “within reach”, according to projections by the International Energy Agency (IEA).

State-owned Coal India is the world’s largest coal producer, with fast-growing output topping 773 million tonnes in the latest financial year. It is targeting 1 billion tonnes of annual coal production by 2025-26 by opening new mines and expanding dozens of existing ones.

IEA calls for next national climate plans to target coal phase-down

In its latest annual report, Coal India cited “pressure of international bodies like [the] UN to comply with [the] Paris Agreement” as one of the main threats to its business. Coal India’s share value has more than doubled over the last 12 months on the back of stronger coal demand in the country, as extreme heatwaves have fuelled the use of air-conditioning among other factors.

State-run mining and energy giant China Shenhua plans to invest over $1 billion in 2024 to expand its fleet of coal power stations and build new coal mines. “We will keep a close eye on climate change to improve the clean and efficient use of coal,” its latest annual report said.

Big investors

The funds with stakes in those coal-heavy companies are managed by Fideuram, an arm of Italy’s largest bank Intesa Sanpaolo, US-based AllianceBernstein and Mercer, a subsidiary of the world’s largest insurance broker Marsh McLennan.

Coal investments in Fideuram’s Article 8 funds – worth at least $16 million – also appear to breach the company’s own coal exclusion policy, designed to rule out holding shares in certain coal firms.

Two of its flagship “emerging markets” funds claim to promote environmental and social characteristics including “climate change prevention” and the “reduction of carbon emissions”, according to information disclosed under EU rules. To achieve their ‘green’ objectives, the funds claim to exclude any investment in companies “deriving at least 25% of their revenues” from the extraction, production and distribution of electricity connected with coal.

But Climate Home found the funds include investments in at least six major coal companies exclusively or primarily involved in coal mining or power generation.

A coal-fired power plant under construction in Shenmu, Shaanxi province, China, in November 2023. REUTERS/Ella Cao

Fideuram did not answer Climate Home’s questions about the funds’ apparent breach of their own policy. But a company spokesperson said in a written statement that “investments in sectors with high-carbon emissions do not conflict with the objectives of the SFDR, which concern the transparency of sustainability investments, nor with the Paris Agreement, which promotes a transition to a low-carbon economy”.

A spokesperson for Mercer said its Article 8 fund, which holds shares in NTPC and China Resources Power Holdings. has an exclusion policy to avoid investing in companies that generate more than 1% of their revenue from thermal coal extraction. “Based on the data provided by ISS [a provider of environmental ratings], no groups involved breach the 1% threshold, and therefore, the fund is not in violation of its SFDR commitments,” they added.

AllianceBernstein did not respond to a request for comment.

Coal-hungry steelmaking

While excluding investments in so-called thermal coal used for electricity generation, several ‘green’ funds put their money in companies producing coking coal – or metallurgical (met) coal – which is used to make steel.

Goldman Sachs’ Article 8 funds hold shares worth several million dollars in Jastrzebska Spolka Weglowa, Europe’s largest coking coal producer, and Shanxi Meijin in China. BlackRock offers exchange-traded funds (ETFs) tracking indexes that include investments in SunCoke, a leading met coal producer in the US and Brazil, Alabama-based Warrior Met and Shanxi Meijin.

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Reclaim Finance’s Cuvelier said that, up until recently, the focus has been on pushing thermal coal out of investor portfolios because the alternatives to met coal in steel production were “less developed”.

“There are now increasing calls on financial institutions to cover met coal as well in their exclusion policies as alternatives exist,” she added. “It’s becoming very important because there are new projects under development that should be avoided”.

A spokesperson for BlackRock said: “As a fiduciary, we are focused on providing our clients with choice to meet their investment objectives. Our fund prospectuses and supporting material provide transparency as to the methodology and investment objectives of each fund”.

Goldman Sachs did not reply to a request for comment.

Reforms on the horizon

At the end of 2022, the European Commission began a review of the SFDR’s application with a view to updating its sustainable finance rules.

Future reforms may include changes to the ways funds are categorised. “There are persistent concerns that the current market use of the SFDR as a labelling scheme might lead to risks of greenwashing… partly because the existing concepts and definitions in the regulation were not conceived for that purpose,” the Commission said in a consultation paper released last year.

It also indicated that the existing categories under Articles 8 and 9 could either be better defined or scrapped entirely and replaced with a different system. The new Commission, yet to be formed following last month’s elections, will decide if and how to move forward with the reform process.

Lithium tug of war: the US-China rivalry for Argentina’s white gold

Separately, the EU’s market supervisory authority, ESMA, has recently issued guidelines to prevent funds from misusing words like “sustainability”, “ESG” – environmental, social and governance – or “Paris-aligned” in their names. A handful of the funds with coal investments analysed by Climate Home have used those labels.

Under the new guidelines, asset managers wanting to slap climate-friendly labels on their funds will have to exclude companies that derive more than a certain percentage of revenues from fossil fuels.

Climate Home produced this article with data analysis contributions from Stefano Valentino (Bertha Fellow 2024) and Giorgio Michalopoulos. This article is part of an investigation coordinated by Voxeurop and European Investigative Collaborations with the support of the Bertha Challenge fellowship.

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The fund will help implement the goal of protecting 30% of the world’s land and water ecosystems by 2030, also featured as the central target of the biodiversity agreement. 

In the final text, countries agreed to mobilize $200 billion from different sources (including direct grants, philanthropy and private funds), while ending at least $500 billion worth of harmful subsidies. 

To channel some of that money, countries adopted an initiative by Brazil and African countries to establish a new trust fund. The Global Environmental Facility (GEF) will establish the fund by 2023 and it will later have its own governing body. 

EU president Ursula von der Leyen said in a statement it was “very positive” that countries adopted measurable targets to protect nature, “as well as a mechanism to finance their implementation with the Global Biodiversity Fund.” 

The Plenary: Adoption of Decisions has officially started!

Watch live in order to learn what is happening at #COP15

: https://t.co/ZjGOFDkUTM pic.twitter.com/2oU1BIwrbs

— UN Biodiversity (@UNBiodiversity) December 19, 2022

In Montreal, delegates from every country in the world except for the US negotiated a deal to reverse the loss of biodiversity by 2030. Governments agreed to protect 30% of the world’s land and water ecosystems by that date.

To achieve this goal, backing it with proper finance was a key lesson from last decade’s Aichi biodiversity agreement, which failed to deliver on every target set. The funding gap for biodiversity has been estimated at $700 billion per year.

Lina Barrera, vice-president for international policy at Conservation International, said the creation of the new biodiversity fund is a “necessary step”, but added “there is still farther to go” to close the funding gap. 

Quick cash 

One Latin American negotiator told Climate Home the initiative for a new fund emerged from the need of some developing countries to access cooperation funds quickly, which was often not possible through the GEF.

“It takes too long from the moment you apply (to GEF funds) until the money gets to the field. The risk is implementing (the Kunming-Montreal deal) quickly, given we have only eight years left until 2030,” the delegate said.

Cop15 global nature deal passes despite DR Congo’s objection

Early in the negotiations, a group of 20 countries harbouring 70% of the world’s biodiversity called for a “supplementary global biodiversity fund” to be set up in order to “overcome the concerns regarding accessibility of funds”.

The final text reflects some of these concerns, as it calls on the GEF to set up a fund “with a simple and effective application and approval process, providing easy and efficient access to resources.” 

Carlos Manuel Rodríguez, CEO of the GEF, welcomed the adoption of the Global Biodiversity Fund and said the facility would work to operationalise the fund “in a timely manner”. “Today’s agreement is wonderful news, and it creates real momentum as we push toward 2030 and the critical goals ahead of us,” he added in a statement. 

Who pays? 

Donors to the fund will include developed countries and developing “countries that voluntarily assume obligations of developed country parties.”  

However, most of the fund’s money will come from other sources such as private sector or philanthropy, as developed nations only committed to directly provide $20 billion a year by 2025 and $30 billion by 2030.

Megaforested nations such as Brazil and the Democratic Republic of the Congo both criticised this financial pledge, with the DRC threatening to veto the whole agreement over this. In the final plenary, the country’s vice-minister Ève Bazaiba welcomed the Kunming-Montreal deal while “expressing reservations” on the financial target.

Cop15: Governments split on ditching nature-harming subsidies in Montreal

Observers welcomed the creation of the Global Biodiversity Fund as well as the targets from the Kunming-Montreal biodiversity deal, while stressing the need for broader reforms.

“[The biodiversity fund] will not be sufficient to solve the biodiversity finance challenge: we need deep reforms in financial institutions, in particular the International Monetary Fund and the World Bank,” said the human rights NGO Avaaz in a statement. 

Just a month ago, at the UN climate change talks in Sharm el-Sheikh, the world’s governments also agreed to set up a new fund to aid victims of extreme weather events. 

This was regarded as a big breakthrough, but there are still questions on how to get it running, which countries will contribute to it and which countries will be eligible for support. 

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Shanghai, China’s financial centre. Financial reform is needed to tackle climate change (Flickr/ Bernd Thaller)

By Alex Pashley

“Blowback” from climate change could wreck the financial system unless regulators rewire it to ditch fossil fuels.

So says Nick Robins, former head of HSBC’s climate change unit and author of a UNEP report published today, which urges sweeping reforms to shift multi-trillion flows of international finance to insulate countries from global warming.

Global greenhouse gas emissions have to fall to net zero between 2055 and 2070 to keep global warming below the 2C level governments have agreed to avoid.

If they are serious, that means a sharp correction in the value of unburnable fossil fuels, with ‘stranded assets’ set to rock the world economy.

Central bankers must pull levers now to soften the destabilising transition to low-carbon alternatives, recommended the ‘Coming Financial Climate’ report by the Inquiry into the Design of a Sustainable Financial System.

“The financial system hasn’t been doing its job as it should be,” Robins, told RTCC, “new tools are required to design it for a new era.”

Robins cites examples from central banks in Bangladesh, Brazil to the UK that are re-writing regulations in recognition of climate impacts.

They range from placing ‘green financing’ on balance sheets, binding banks to set up strategies for ‘environmental risk management’, and monitoring climate risks in the insurance sector.

Though such initiatives are firmly in their infancy.

“It’s something new over the last two or three years, but what’s interesting is the voices arguing for it are coming out of the financial system. If you want long-term sustainable investment, you need to look at the climate,” Robins said.

The flows of capital to avert climate calamity are enormous, moreover.

Sustainable development needs reach $17 trillion, though they are just a fraction of global financial assets valued in 2012 at $218 trillion, according to the United Nations Environment Programme (UNEP).

So far wealthy countries have pledged $100 billion a year from 2020 in a green fund to developing countries to prepare for increasing impacts like rising sea levels, droughts and heat waves.

Report: Fossil fuel giants reject calls to keep assets in ground

Mobilising finance for low-carbon, resource efficient assets like solar or wind power was key.

Those investments for low-carbon generation need to be as much as $1.1 trillion a year between 2010 and 2029, the IPCC estimates.

But in the face of the juggernaut of fossil fuel companies who forecast temperatures to rise far above the 2C target, Robins said the obstacles were numerous, but no singular one “fundamental” to writing off financial reform.

One would be getting pension funds and companies to disclose portfolios bearing carbon-intensive assets in the pursuit of transparency.

Bodies like the Climate Disclosure Standards Board and Sustainability Accounting Standards Board are helping, developing new frameworks for sustainability and climate accounting and disclosure.

Report: Climate one of “top risks” facing insurance industry says BofE governor

Convincing central banks they had a mandate for meddling in climate regulation was another.

Robins said the Bank of England was reviewing climate risks related to its insurance industry, but monetary authorities in other counties were less keen to intervene in issues usually dealt with by the environment and energy ministries.

“It’s quite reasonable for a regulator to be dealing with this, due to the spill over or environmental blowback on the financial system,” Robins said.

This year with upcoming UN conferences on sustainable development goals in September and a crunch summit to sign a global emission-reduction pact in December, was critical.

Nevertheless momentum is growing.

“In developing a strategy for what a green financial system would be like, different central banks and regulators are coming at it in different ways,” Robins continued, “but there’s a growing realisation it’s leading to a more enriched discussion at the international level.”

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“Fossil fuels are investor favourites for a reason,” says BNEF analyst
(Pic: BP)

By Megan Darby

New ways to invest in clean energy are needed on a massive scale to compete with the fossil fuel sector, say analysts.

In the past two years, cities, churches and universities have signed up to starve fossil fuel companies of their cash.

Divestment campaigners say continuing to extract coal, oil and gas is unsustainable if the world is to effectively tackle climate change.

However, for mainstream investors there are limited viable alternatives to big energy, Bloomberg New Energy Finance (BNEF) highlighted on Tuesday.

Quitting coal will be relatively easy, the report said, but finding an alternative to the US$5 trillion oil and gas equity market is “a challenge”.

Clean shift

BNEF estimates US$5.5 trillion will be invested in clean energy by 2030. But the transition from dirty to clean energy is not straightforward, according to the latest report.

Institutional investors such as pension funds, governments and insurance firms hold major oil and gas stocks, in particular, because they offer a large-scale home for their money and pay handsome dividends.

Nathaniel Bullard, author of the report, said “Fossil fuels are investor favourites for a reason. Very few other investments offer the scale, liquidity, growth and yield of these century-old businesses with economy-wide demand for their products.

“Given their scale and performance, oil and gas companies are attractive to institutional investors. Coal firms, smaller and recently underperforming wider markets, are less of a focus for institutions.”

The opportunities in renewable energy, meanwhile, are yet to reach the same scale. They are also exposed to risks associated with emerging technologies.

As such, they fit the investment profile of banks, developers and utilities but not institutional investors.

The growing green bond market offers a low-risk way of backing clean growth. Yet the US$14 billion issued last year made up just 1% of the US$1.4 trillion corporate bond market.

Another option is YieldCos. Such funds own renewables that are already up and running, avoiding the risky construction stage, and pay out the majority of cash flows to investors. Again, these are a relatively new phenomenon, valued in the low billions.

“The $5.5trn needed to build out clean energy through 2030 will offer many new opportunities for investors,” said Bullard, “but a major switch into that and out of fossil fuels would require a massive scale-up of new investment vehicles.”

Alternatives

BNEF also looked at seven established sectors that could potentially absorb some of the cash divested from fossil fuels.

These had some of the same benefits to investors as oil and gas, but none had the same combination of scale, growth and yield.

From a green perspective, they present opportunities for energy efficiency initiatives.

Information technology is the biggest, worth US$7.6 trillion, but is not so generous with dividends. The pharmaceutical sector, worth US$3.9 trillion, similarly offers high growth but low yield.

Bullard concluded: “Fossil fuel divestment is neither imminent nor inevitable. But, neither is it impossible for motivated investors.”

The divestment debate is evolving rapidly, with awareness growing of the financial risks of exploiting coal, oil and gas.

The Carbon Tracker Initiative showed some 80% of proven fossil fuel reserves must stay in the ground if the world is to avert dangerous warming.

As governments act to curb carbon emissions, the fossil fuel firms will be left with “unburnable carbon”, it warned.

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(Pic: YoTuT/Flickr)

By Ed King in Pori

Morocco should be held up as a ‘poster child’ for effective green policymaking, according to the World Bank’s top climate official.

Speaking at an environmental meeting in Pori, Finland, Rachel Kyte said the Rabat government’s recent decision to cut tax breaks for petrol and gas used a template other developing nations could follow.

“What Morocco did was remove subsidies on fossil fuels, because they couldn’t afford it, not because they had a big climate goal, but because they couldn’t afford the subsidies,” she said.

“Then they started to incentivise investments in renewable energy, domestic and foreign.”

The latest subsidy-cutting programme was published in January, with support for a litre of diesel set to fall from $0.59 pre litre to $0.22 by October.

According to the IMF, by 2011 energy subsidies accounted for 5.5% of Morocco’s GDP, and 17% of its total investment budget.

More than 70% of the population were unaware that the real price of a 12-litre bottle of cooking gas was $14, as opposed to the government fixed retail price of $5.60.

Ministers launched an extensive communication and consultation strategy before choosing to implement a series of gradual reductions in support.

Kyte said these and the government’s longer term energy policies have already led to a clean energy investment leap from $300m to $1.8 billion.

This came on the back of the Arab Spring, which caused a tenfold drop in investment across the region, and lingering political instability in Morocco’s neighbours.

Report: French Foreign Minister calls for end to subsidies 

Fossil fuel subsidies are frequently cited as a major impediment to curbing global greenhouse gas emissions, leading to overconsumption and making clean energy alternatives uncompetitive.

According to a 2013 report from the Overseas Development Institute (ODI) Indonesia, Pakistan and Venezuela spend twice as much on fossil fuel subsidies as they are on public health.

The ODI also revealed some rich countries spend up to seven times more backing oil, gas and coal than they do helping poorer countries address climate change.

In 2013 they totalled US$544, but many developed and developing governments appear reluctant to attack them, fearing short term hikes in domestic energy prices.

Jordan, Indonesia and Malaysia also started to cut subsidies last year, but many leaders fear a repeat of Nigeria’s 2012 experience, where President Goodluck Jonathan first scrapped and then reinstated a government petrol subsidy, in the face of riots across the country.

Financial backing

But Kyte argued that if cuts are matched with policies to offer energy alternatives – such as efficient cookstoves, solar panels or efficiency schemes, they can work effectively – and will attract private sector support.

“There is a clear cause and response. You can act and send that clear signal – and the response from the private sector and investors is pretty quick,” she said.

“There is finance pent up looking for long term green and sustainable solutions.”

That confidence in green investment flows may surprise may long term observers of UN climate talks, used to warnings that these have long since dried up.

The UN’s nascent Green Climate Fund is the official response to this perceived cash crisis, but recent news that the green bond market raised $20bn in the past seven months suggests private interest in the sector is growing.

Last week the German development bank KfW announced a €1.5 billion (US$2 billion) green bond, while leading insurer Zurich said it planned to set aside $2bn for bonds, citing their growing appeal.

“It’s significant because you have some big bonds within that $21 billion – corporate bonds and utility bonds,” Kyte said.

“There is pent up capital that needs to invest in green…and there’s more of that being mandated – so they have to have somewhere to go.”

She added: “For Africa you see the opportunity for a clean energy mix that was never there before.

“Geothermal resources, hydro, solar, wind offer real opportunities complementing gas. You see the possibility for massive investments.”

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Poor countries should not accept a bad deal in Doha, NGOs have said as the UN climate change negotiations apparently stumble toward a late and increasingly insipid conclusion.

Finance is proving a major stumbling block, and the group of Least Developed Countries (LDCs) claim that there was an offer of $10bn on the table for next year, which would match the current levels of climate funding.

LDC chair Pa Ousman Jarju initially said he would rather leave empty handed but later denied that this was a threat to abandon the talks.

“The saddest part is that the developing countries are being forced into accepting the unacceptable and when they raise their voices people say do you want to be blamed for the collapse of the talks,” said Celine Charveriat, director of campaigns and advocacy with Oxfam.

“They are left with a horrible dilemma of accepting nothing or being blamed for blocking the negotiations,” she said.

“Oxfam and many other NGOs have said they stand in solidarity with developing country governments. If the time comes for them to walk out, we’ll support them and stop the spinning machine that will try to say it’s their fault. The only blame is with rich countries who did not keep their word.”

LDC Chair Pa Ousman Jarju appeared to back track on a threat to walk out on the talks.

Away from finance, there is also frustration with the weakness of the Kyoto Protocol text for the new round of emission reductions. Critics say its low number of participants, unambitious targets and the presence of left over carbon credits all reduce its environmental integrity.

“It’s an empty shell, an insult to our futures,” Asad Rehman, spokesperson for Friends of the Earth International said.

“There is literally no point in countries signing up to this sham of a deal, which will lock the planet in to many more years of inaction.

“What the world and its people need is more urgent action on cutting climate pollution, more help to those transforming their economies and more help to those already facing climate impacts. This text fails on every count,” he added.

Despite concerns with where the Doha deal is headed, Tony deBrum, the Marshall Islands’ Minister of Foreign Affairs said the engagement provided by the UN climate change process was “vital” and there was nothing else to replace it.

Emmanuel Dlamini, chair of the African Group said they would have to resort to praying for their survival if the UN talks collapsed.

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A global levy on shipping emissions could be worth at least $10bn a year to the Green Climate Fund (GCF), according to WWF.

Talks on a financial mechanism to incentivise reductions in emissions from the industry are ongoing through the UN’s International Maritime Organization (IMO) but the latest progress has seen an outline of how a potential system could operate.

A levy placed on all ships would be collected from shipping companies, with the US pressing for this to be linked to fuel consumption. In order to compensate developing economies, their governments would then receive a rebate, taken from the collected revenue.

Shipping could raise as much as $10bn a year for the Green Climate Fund. (Source: Flickr/IngridTaylar)

The GCF is the centrepiece of the UN’s climate finance plans with a goal to raise $100bn a year by 2020. Levies on shipping and aviation emissions have been touted as a key source of finance for the fund since its inception.

“The money should be used for in-sector activities to improve research, efficiency and capacity building to reduce shipping emissions further,” said Mark Lutes, Policy Coordinator at the WWF Global Climate and Energy Initiative who follows the IMO talks closely.

“The money that is left, which could be substantial, it could be tens of billions of dollars, at least $10bn, should go to climate finance ideally through the GCF,” Lutes told RTCC.

Before any of this money is issued however, Lutes says the governments of developing countries must first be compensated to ensure that the UN climate change agency’s principal of Common But Differentiated Responsibility (CBDR) is met. This ensures that major emitting, wealthy economies take a heavier share of the burden.

The levy cannot be selectively applied to ships from specific countries as they can simply “re-flag” under a different state in order avoid the charges.

Lutes said the rebate is likely to be linked to the value of a country’s imports so that those consuming the fewest goods are affected least by the levy.

Issuing the levy directly through national governments is also a non-starter.

“The money from the global shipping industry should be handled internationally. If it goes into national treasuries we’ll never see it again, it will disappear into national budgets,” said Lutes.

The IMO talks on a potential mechanism are held roughly every eight months with the next meeting scheduled for April 2013.

Related articles:

Will the billions needed for climate change finance be found in Doha?

IMO stalls on shipping CO2 emissions as clash with EU looms

Shipping industry rails against inclusion in national climate change targets

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Urgency and precaution are not easily reconcilable. The Green Climate Fund (GCF) – which met for the second time earlier this month – will have to negotiate that balance. As climate negotiations chug along laboriously, this global fund will ensure that much-needed investment is not stalled as a result.

By 2020 it could be holding the purse strings for up to US$100 billion in climate money every year.

But not before it is decided how the fund will operate. Events in the lead-up to the meeting in Songdo, South Korea signal an inauspicious start to that process.

Currently the GCF consists solely of its executive board, inaugurated in August. An illustrious group of Finance Ministers, Environment Ministers, diplomats and bankers, board members have been tasked with crafting their fund from scratch – people, policies and systems to allocate and monitor spending.

Until the fund becomes operational in 2014, board members will be quite literally writing their own rules.

It is hard to overstate the responsibility entailed. We are entrusting this global fund with spending scarce public resources as efficiently as they can, and leveraging the private capital required to meet the challenge of climate change.

Ban Ki-moon at a UNFCCC finance workshop in Durban. Maintaining a scrutinising spotlight on climate finance is key to ensuring its integrity and effectiveness. (Source: Flickr/UNclimatechange)

Ultimately these decisions will impact the success of efforts to reduce carbon emissions, raise us above ground level, shield us from storms and tidal surges, and channel water through drought.

Decisions made now – in these earliest phases of the fund’s existence – may seem procedural by comparison, but they will lend shape to the dynamics of decision-making for years to come.

This began with the vote on where the fund will sit – an appealing prospect for any country, as alongside prestige it will attract hearty investment. In the running were Germany, Mexico, Namibia, Poland, Switzerland and South Korea, with the latter the winner by consensus.

Home truths

At Transparency International we have been watching this carefully. Corruption scandals in Olympic and FIFA host country bidding processes have shown how bribery can buy votes when billions of dollars are at stake.

Signed Fair Play commitments, it is hoped, have ensured that each country entered the contest on equal footing.

No such public commitments exist for the GCF. Board members are not subject to codes of conduct or conflict of interest policies either, because they haven’t yet written them. While the fund’s rulebook is blank, it follows that its members might exercise a degree of discretion in their modus operandi.

It seems they already are. Transparency International received a report alleging that one of the bid countries was offering honorariums of US $2000 to board members to take part in a conference. Paying panellists’ expenses is not uncommon, but with such high figures involved, our informant saw this as an attempt at swaying opinion in that candidate’s favour.

When we inquired, the country representatives assured us that they did not consider this sum of money excessive, “considering the participants’ expertise, reputation, time and contribution”.

Some board members, they added, had declined the honorarium entirely. Their letter concluded that, “we will take your concerns into account and will adjust the amount”.

Related articles:

Transparency is at the heart of solving UN climate talks deadlock

Green Climate Fund prepares to name host city but meeting dogged by civil society shut-out

How the Green Climate Fund’s host city will impact future climate change action

As for another authority on the matter, the United Nations – the fund’s interim secretariat – told us that they cannot intervene in events external to official meetings. This raises some salient questions about the accountability – present and future – of the fund.

The board is required to report to the UN at the upcoming climate conference in November. Until then, who is responsible for following up on this claim, or others to come? The 195 member states?

We trust that the fund’s board are people of competence and integrity. But trust needs reassurances. We are asking that these people set the bar high when it comes to ethical, anti-corruption standards – that transparency trumps privacy and that clear chains of accountability mean that people are directly answerable to their actions.

An independent eye

A chief element of any anti-corruption strategy is independent oversight. Board members will be deciding what information they should and shouldn’t disclose to the public, appointing auditors, designing monitoring frameworks and instituting a body to investigate them in cases of suspected corruption and fraud.

It is crucial that oversight staff are truly independent, not compromised by whoever writes their paycheck. Citizens should also be allowed to have a say in decisions that affect them, and report wrongdoing without fear of retribution.

Getting this right now will boost the fund’s credibility and set the tone for the very many people who handle climate money further down the line – government ministries, development agencies, banks, companies and NGOs.

Climate finance is ultimately about human survival. It is urgently needed, but we first need to take the time to build the checks and balances that will protect it against loss, waste and abuse.

Alice Harrison is Communications and Advocacy Coordinator for Transparency International’s Climate Governance Integrity Programme. An earlier version of this story appeared on the Transparency International website.

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The Green Climate Fund’s (GCF) landmark decision on a host city risks being overshadowed by controversy over access to the meetings for NGOs.

While one of six cities will be selected as the fund’s long term base at the conclusion of the GCF’s second board meeting in South Korea this week, issues over the participation of so-called observer organisations remains a problem.

Charities, think tanks and campaign groups are typically admitted to UN proceedings and given a platform to contribute to the debate. This access has been severely limited at both of the GCF board meetings however.

“We feel a bit like kids begging a teacher to let us talk, it’s quite retrograde,” said Karen Orenstein, International Policy Campaigner with Friends of the Earth (FoE) US.

The German bid for the Green Climate Fund would see this proposed new building house its employees in close proximity to the UNFCCC in Bonn.

“We had two short interventions accepted on Thursday but both our requests for interventions today, even with the promise that they’d be kept under one minute, were rejected. There were draft documents distributed for consideration today as well but we were told we could not have a copy,” Orenstein told RTCC adding that there were only eight or nine civil society representatives at the talks.

“FoE US wants the GCF to succeed, to be a good fund with environmental integrity and justice at its core and something we can improve and fight for in the future. But it is not setting a good precedent and it is very frustrating to be spending time just trying to even get into the meetings,” said Orenstein. “Some people are wondering why they flew half way around the world just to watch a live feed of the talks.”

She was unwilling to speculate on the “rumours” behind the root cause of the limited access.

The GCF has been criticised previously for being too close to the private sector and the World Bank, which will act as its trustee for the first three years of its operation.

Home sweet home

Meanwhile, Henning Wuester Senior Manager at the Interim Secretariat of the GCF, says the vote to decide on the host city will take place on Saturday morning (October 20).

“First the co-chairs will look to see if there is a consensus around one city and failing that there will be an informal process to assess which nominee has the largest support,” said Wuester.

The six cities in contention are Bonn (Germany), Mexico City (Mexico), Songdo (South Korea), Windhoek (Namibia), Warsaw (Poland), and Geneva (Switzerland).

“I expect board members to take a broad set of criteria into account for their decisions. I am impressed by how strong all six bids still are,” said Wuester.

“They made presentations at the first meeting in August and again today. They have all put a lot of documentation on the table. If anyone doubts that there is support for the GCF they need only look at the bid documents to see that there at least six countries with a belief in what we are trying to do at this stage.

“Many see the GCF as the key building block to make the changes we need in reality. A functioning fund that can make things happen should make the UNFCCC negotiations easier. The money won’t be available in Doha, but when everyone sees that the GCF is moving forward it will make a positive impact on the talks in Doha,” said Wuester.

Orenstein said the GCF will only make its impact once there is money committed.

“The choice of host city and having a nice building doesn’t really matter if there is no money in the fund. What would really provide the UNFCCC process with a bit of a boost would be some financial pledges,” she said.

Related Articles:

Call for UN climate agency to back Robin Hood Tax

How the Green Climate Fund’s host city will impact future climate change action

Climate change finance promises not being kept, says new DARA report

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Finance negotiations at the UN biodiversity summit in Hyderabad are in deadlock with under 24 hours till their scheduled end.

Delegates participating in discussions told RTCC that the level of funding to achieve the Aichi Biodiversity Targets had not been agreed.

Developed countries want to establish baselines and a funding framework before committing cash. This stance appears to be unacceptable to poorer nations who argue they urgently need help to increase their conservation efforts.

The IUCN’s Gerard Bos told RTCC talks over paragraph 7 of the resource mobilisation text, which refer to targets, had taken up a significant part of the afternoon with no sign of a resolution.

An assessment published at the start of the week calculated that saving endangered species and their habitats would cost $50 billion a year. Protecting the world’s forests alone could come to an annual bill of $30 billion, according to the Global Canopy Programme.

While those figures are unlikely to be met at COP11, smaller ‘fast track’ funds could be agreed as a compromise.

In a sign that discussions would take some time, EU Environment Commissioner Janez Potocnik tweeted: “Looks like being a long night here at #cop11 still negotiating on resource mobilisation”.

Speaking to RTCC, WWF Conservation Executive Director Lasse Gustavsson said the current Euro crisis would affect the size of pledges, but argued it could not be used as an excuse for avoiding the issue.

“We had serious commitments in Nagoya two years ago, and if we don’t find the money we won’t have the conservation. In order to set ambitions in motion, cash is key,” he said.

He added: “If we don’t put money on the table at this COP, at least what we need is a robust plan on the table for two years from now, and I would hope governments would find some way to fast track some funding to the poorest countries so they can get their systems right.”

Lasse Gustavsson from Responding to Climate Change on Vimeo.

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Climate finance should be given a bigger chunk of the agenda at the Doha climate negotiations to prevent five years of work being rendered meaningless, a leading NGO has said.

The Climate Action Network (CAN) said in its most recent update from the UN talks in Bangkok that without addressing a number of issues on climate funding at the COP18 summit in Doha this November, the end product would be an “empty shell”.

The Bangkok talks are seeking to lay foundations for the Doha summit but their are concerns that finance is being swept under the carpet. (Source: Flickr/UNFCCC)

The Long-term Cooperative Action (LCA) stream of the talks has conducted some work on finance, which developed countries in Bangkok are now claiming is complete. They want the LCA’s work transported to the new Durban Platform (ADP).

The LCA was adopted in 2007 at COP13 as part of the Bali Action Plan of focuses on a number of areas absent from 1997 Kyoto Protocol.

As the name suggests the LCA’s aim is to develop a long-term strategy for reducing global Greenhouse Gas Emissions, culminating in what it refers to as an ‘agreed outcome’.

“Having created the Work Programme on Long Term Finance, and mandated it to report directly to the COP in Doha, developed countries in the LCA are now claiming mission accomplished,” says CAN.

“That is clearly not the case. Right now, there is little confidence that scaling up climate finance will be given the attention it so desperately deserves.”

The current climate finance deal, so-called Fast Start Finance, expires at the end of 2012 and the Green Climate Fund, its long term successor, is unlikely to be operational before 2014.

There are no pledges on the table to fill this gap.

CAN has identified a number of unresolved issues that must be targeted in Doha to ensure the climate finance framework can support the most vulnerable countries as they look to adapt to and mitigate for climate change.

CAN wants the Doha talks to double the levels of Fast Start Finance for 2013 until at least 2015 with guarantees that the money is not simply redirected aid from other department’s budgets, it must be new and additional.

It wants commitments during the flagship UN climate change summit for $10-15bn of initial funding to kickstart the Green Climate Fund.

It also wants confirmation of a permanent, high profile home for finance discussions in the UN process moving forward.

The calls coincided with a protest by Jubilee South- Asia Pacific Movement on Debt and Development (JS-APMDD).

Lidy Nacpil, JS-APMDD coordinator, said that developing nations were owed “reparation” from big emitters for using more than their share of the atmosphere’s capacity for safe CO2 levels.

“The mobilization of unprecedented levels of finance is needed to enable people, communities and nations to deal with present and as well as already unavoidable future impacts of climate change, much of which are irreversible,” said Nacpil.

“The delay in mobilization of climate finance imperils the people of vulnerable countries,” she added.

Related articles:

Bangkok 2012 – EU signals it will not adopt 30% emissions target

Bangkok 2012 – Future of climate finance and adaptation trigger debate as LCA talks heat up

Bangkok 2012 – USA accused of backtracking on legally binding UN climate treaty

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The UN climate change talks are not supposed to be about us versus them, given that everyone wants the same end result.

However true this may be, there is one inescapable divide that was prominent during today’s final session of the UNFCCC Long Term Finance workshop: the haves and the have nots.

In UN speak they are called donors and recipients, the countries paying into climate finance funds and those receiving funding.

The current system of “fast start finance” agreed in Copenhagen is in its third and final year. The $30bn injection of funding is the pre-cursor to the Green Climate Fund (GCF), the long-term set-up that will administer flows of cash in the direction that climate impacts and mitigation opportunities dictate.

Getting projects up and running should take precedence over minute diplomatic detail delegates said. (Source: Copyright Nic Bothma)

There were some awkward moments during today’s session and delegates candidly discussed the (sometimes embarrassing) logistical challenges they faced during the fast start finance era.

Colombia’s Isobel Cavalier described how her nation was unaware that it was registered to receive funding for certain projects and the effect this had on the countries that were stumping up the cash.

“Donors are unnerved and exasperated because we don’t know that we are listed for funding. Sometimes we know nothing about it. We need a systematic way of working so we all, donors and recipients, have the same information,” she said.

Jessica Brown from the US State Department warned of the consequences that this can have on budgets.

“It’s counter productive when governments don’t acknowledge our support and makes it harder for us to go back to our own governments to get more support,” she said.

“Why aren’t countries aware of the fast start finance that we’re delivering? Maybe it’s the lag between the budget and the projects’ timetables? Maybe we need to be realistic about the level of bureaucracy that this money goes through,” she said adding that a move away from the “us versus them” mentality and toward more partnerships might improve the situation.

The miscommunication is not just across international boundaries however.

Fred Onduri from the Ugandan delegation described an exchange with an Australian Minister about funding. The Minister claimed that the country had already invested in Uganda leaving Onduri slightly baffled. When he returned to Kampala and spoke with the Finance Ministry, a fast start finance contribution from Canberra had indeed been made. His own department simply hadn’t been told.

Japanese negotiator Junya Nakano acknowledged that this was a far from ideal situation for donors either, suggesting climate change projects should be part of mainstream development plans to cut the risk of allocations going AWOL between departments.

Act now, talk later

While there are still clearly plenty of elements of the process requiring further elaboration, there were warnings that perfecting the diplomatic details could get in the way of action on the ground.

“We should try to waste less time on not very helpful elaboration. Donors can be more creative and effective and try to deliver results rather than focusing too hard on workshops and awareness building and so on,” said Marina Olshanskaya, United Nations Development Programme (UNDP).

Representatives of France and the Philippines both said there needed to be more attention on defining specific legal terms such as “new and additional” (the notion that climate finance is not simply rediverted, already allocated aid). The EC and the OECD both said it would be better to concentrate on actions and leave the finer detail to later, a sentiment echoed by India’s Rajestree Ray.

“We need to start the initial capitalisation [of the GCF] now. We don’t have to wait for the details to be finished, enough has been done to start putting money into it,” said Ray.

The workshop concluded with a tourism style promo for Cape Town, which was revealed as the destination of the next workshop on Long Term Finance. If delegates are serious about cutting some of the red tape that underpins the complex financial processes, they might just find the spare time for a little tourism of their own.

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Day two of the UN climate change agency’s finance workshop turned its attention to identifying specific sources of finance.

The issue is a political hot potato at the climate talks with its Green Climate Fund already behind schedule, the current system expiring this year and unilateral funding schemes attracting criticism. Delegates showed again how adept they are at passing it among themselves.

Familiar divides, long-running arguments and little agreement.

A number of ideas that have been floated as sources of climate finance were dismissed during the session.

Ending fossil fuel subsidies was a strong theme among NGOs and campaigners at Rio+20. (Source: Flickr/Avaazorg)

Fossil fuel subsidies

NGOs (largely in the western world) are calling for the end of fossil fuel subsidies which they argue could free up as much as $1 trillion.

Sadly its not that simple. In the developing world, the removal of fossil fuel subsidies for the poor has created civil unrest.

“Fossil fuel subsidies often benefit the rich. But there could be genuine social challenges that result from cutting fossil fuel subsidies,” said Paul Watkinson from the French delegation. “If real, these need to be addressed.”

Hey @UN_climatetalks, over a million people support #endfossilfuelsubsidies. Time to put that $$$ to better use. #LTFchat

— David Turnbull (@david_turnbull) July 10, 2012

Financial Transaction Tax (FTT or Robin Hood tax)

New French President Francois Hollande revealed tax on financial transactions is under construction between nine EU nations.

Britain has summed up the argument against, saying that if it takes part businesses will leave for another market.

Paul Bodnar from the US State Department doesn’t see a future for an FTT in climate finance.

“The FTT is almost impossible to impose globally. The private actors involved would work around the attacks and could erode tax base further by driving activity to offshore havens,” he said.

“Market based efforts to price carbon emissions are promising. We need sources of finance that are linked to emissions.”

Erik Haite, a Canadian consultant on the panel agreed, adding that it would be impossible for the 195 parties to negotiate a global FTT.

Transport Levies

The idea is simple enough, to charge airlines and shipping operators for every ton of carbon they emit while going about their business.

However, the EU angered many when it set up an EU-wide scheme that was applicable to airlines using airports in its territory, regardless of where the flight originated. Opposition came from China, the US and India.

Rajasree Ray, from the Indian Ministry of Finance summarised her country’s argument against such schemes.

According to IMF, a moderate tax on bunker fuels could generate $15bn after rebates for developing countries: let’s make it happen #LTFchat

— ActionAidUSA (@ActionAidUSA) July 10, 2012

“If transport taxes are levied on developing countries, it will be against the principle of Common But Differentiated Responsibilities,” adding that carbon trading should not be categorised as climate finance and nor should any form of loan.

With three of the main single mechanisms seemingly out of the running then, what’s left?

Many governments have point to the recession as a reason why they are unable to foot the bill for climate finance.

“The burden of financing cannot be shifted from public to private. If we decided to go to war tomorrow billions of dollars would be available, it’s not about availability it’s about political will,” said Andrew Bishop, lead negotiator for Guyana.

If India’s Ray is correct and her delegation oppose loans, carbon trading and any tax that is not exclusively for the developed world, what’s left?

The Clean Development Mechanism, currently used for small to medium sized projects is one option but as Standard Bank’s Geoff Sinclair points out, it would need to be significantly scaled up.

Old divides

Cuba expressed its dismay at seeing too many western organisations sitting on the panel, which left many delegates shuffling uncomfortably in their seats.

The delegate then made a crucial point that was seized upon by other participants that climate finance is too often expressed as rich nations paying money to poor country and then never seeing it again.

Much climate finance will however be reinvested in developed world technologies, loans will be repaid and ultimately, all benefit from any carbon abatement.

Surya Sethi, a former Indian climate negotiator who moderated the first session took issue with the State Department’s Bodnar for suggesting countries were designated rich or poor in the eyes of the UN climate talks based on their GDP. He appeared to take pleasure in correcting the Washington official, stating that historical emissions were in fact the basis of this categorisation.

Bodnar took his next speaking opportunity to suggest that using any indicator from 1992 was unwise.

“If you think historical responsibility should be based on a list drawn up in 1992 you’re welcome to that opinion. As other countries’ capabilities evolve, I would have thought that you would want them to ramp-up their responsibilities?” he retorted.

The session finished with few answers but its aim is not to find solutions, simply to tee up the debate at the next all-in round of negotiations in Doha this November. With existing financial commitments expiring the following month, the issue could well be at the heart of any progress, or the cause of an impassable stalemate.

The post Where will the money come from to pay for climate change? Lessons from Day two of UNFCCC finance workshop appeared first on Climate Home News.

In UN jargon it is known as Long Term Finance.

What it really means is the money that will be used from 2012 onwards, when the current package expires, to fund cuts in global greenhouse gases and projects to help countries adapt to the new challenges thrown out by climate change. It is targeting a tally of $100bn annually by 2020.

It sounds fairly straightforward, just fundraising on a massive scale.

The Bangkok monsoon floods in 2011 cost $46bn, but should an intense monsoon season attract climate finance? (Source: UN/Mark Garten)

But when you start to look closer, the complexity is enormous. How much money is needed? Does damage from an intense storm season qualify for funding? Who should distribute it, governments, development banks, the UN?

Most importantly, who should pay for what and where will the money come from? New taxes? A carbon price? Diverted fossil fuel subsidies?

Through the UN climate talks, nations have set the target of raising $100bn annually for the Green Climate Fund (GCF). Negotiations on how to get the GCF up and running in time for 2020 are picking up pace with the first workshop on Long Term Finance taking place in Bonn this week

Just opened first long-term #climatechange finance workshop. Looking fwd to seeing new ideas & solutions flow! Join in with hashtag #LTFchat

— Christiana Figueres (@CFigueres) July 9, 2012

Well known development economist and advisor to UN Secretary General Ban Ki-moon, Jeffrey Sachs kicked off today’s proceedings.

He called for a strong price on carbon, which would mean big polluting industries paying a set figure for each ton of carbon that they emit.

“The world will need to find a way to overcome the US and a few other countries resistance to carbon pricing,” said Sachs adding that that price needed to be between $30-50 per ton. The price on the EU-wide carbon trading scheme is around $10.

@JeffDSachs People are terrified by what is happening to climate. If politicians lead, will find that public already ahead of them#LTFchat

— UNFCCC (@UN_ClimateTalks) July 9, 2012

Manuel Montes from the developing world think tank the South Centre ran through some of the estimates of how much money is needed. Two things became clear, the figures involved are mind-boggling and the estimates disparate.

Looking through a number of reports from academics and institutions such as the IEA and the World Bank, a “ball-park” figure of $1.6 trillion emerges.

In figures:

$46 billion: The cost of the Thailand floods in 2011. There is debate as to whether extreme weather events should be counted as climate finance

100,000: The number of people that would need to be relocated in the Caribbean is sea level rises 1m

$1.6 trillion: The rough estimate for the annual cost of adapting to climate change

1800%: The growth in investment in renewable energy in Africa in the last seven years

$3.4 billion: The amount of money for climate change mitigation and adaptation distributed by the Global Environmental Facility since 1992

Critics

The response from delegates to the morning session was varied with numerous concerns raised.

Surya Sethi, a former Indian climate change negotiator, said he was concerned with the responsibility for climate finance being entrusted to the markets – not a new sentiment but one that has gained traction in UNFCCC talks given the series of banking disasters over the past five years.

“The banks have shown that they cannot stably supply mortgages. They can manipulate the Libor rate with an exchange of emails. We must be mad, or smoking something we shouldn’t be to turn to the markets,” he said.

Another Indian delegate said she did not believe that carbon trading was a fair response for the international climate change talks to pursue, calling requests for developing countries to contribute to climate finance as “a double blow”.

Salman from Saudi Arabia (which despite sitting on the world’s second largest oil reserves is classed as a developing country) gave a telling indication of the global south’s intentions and desires:

#LTFchat #SaudiArabia“We are here to learn from developed countries how they plan to mobilise 100 billion a year by 2020”

— Alix Mazounie (@ClimatAlix) July 9, 2012

A Ugandan audience member described how concerned he was that climate finance was being viewed as a business opportunity.

“For us this is not about chasing a few percent of profit. This is about our livelihoods, our survival and social development.”

Sticking to the script

Ultimately, those with an attachment to a country delegation have stuck to the same lines that we see at the negotiations. Developing nations called for assistance to adapt, both in terms of cash and technology. Developed countries meanwhile, have been championing the role of the private sector.

The sensitive subject of Common But Differentiated Responsibilities (CBDR), which is written into the UNFCCC’s guiding principles, is at the heart of finance debates. With the current funding mechanism ending next year, the inescapable issue of the rich/poor divide will have to be overcome or the costs could be borne by all.

Tomorrow the focus is on Sources of Climate Finance – be it development banks, new policies or more involvement from the private sector. It is the key issue in this vital debate.

You can follow what is discussed on our live blog and also via a UNFCCC webcast.

The post Who pays for climate change: What we learnt after day one of the UNFCCC finance workshop appeared first on Climate Home News.

The Bahrain World Trade Centre. (Source: Flickr/JustDONQUE.images)

A new study has revealed that the cleantech sector is being driven by real business demands rather than the pursuit of good publicity.

The report, by the Grant Thornton advisory group, also highlights the growing optimism within the industry.

“Companies once approached the cleantech sector – as buyers or sellers – because it was a good thing to do, a socially responsible corporate action,” said Randy Free, member of Grant Thornton’s global Cleantech group and tax partner in the United States. “But today, around the world, cleantech means reducing costs and increasing profits.”

The research looked at a number of areas from utilities and renewable energy to energy efficiency and construction.

When asked what was driving demand for clean technologies among businesses, the most common answer was cost reduction, which was cited by 52% of the companies surveyed. The least popular answer was to enhance their brand.

Optimism

Optimism in the clean tech sector is on the increase in 2011 with 37% saying they were optimistic about the next 12 months compared to 34% the previous year. The all-sector average fell from 24% to 22% during the same period.

We’re really on the cusp of something big,” said James Brice, sustainability service head, Grant Thornton South Africa.

“We’re not quite sure yet how big, because the government keeps on changing its tack, but we’re going through the first wave of our country’s renewable energy tendering process.”

The impact of policy is not limited to South Africa with Grant Thornton’s analysts in Russia, India, Canada and throughout Europe picking out the role of governments in driving the sector.

When asked to list the cleantech market drivers, Vivek Vikram Singh, associate director, Grant Thornton India said: “One to 10 would be government regulations – everything else is 11th.”

While there are plenty of reasons for the sector to celebrate, the report acknowledges that it is not immune to global financial constraints.

While the situation is improving, businesses taking part in the report continue to list the cost and availability of loans as a major constraint to their operations.

The post Profit not image driving cleantech boom as business tackles climate change appeared first on Climate Home News.

World Bank President Robert B. Zoellick gave his tentative approval to the plans for a BRICS development bank. (Source: World Bank)

The BRICS group of emerging economies is planning a new development bank to redress the balance in large-scale international financing as it pursues a more “just” system.

At the group’s most recent meeting this week, leaders from Brazil, Russia, India, China and South Africa agreed to begin consultations on an alternative to existing institutions such as the Asian Development Bank and the World Bank.

The latter has signalled its tentative approval for the scheme.

“India was one of the sponsors of this [BRICS bank] idea. And partly because they wanted more funds for infrastructure development…if they do develop an institution, the Bank will want to be partner with it”, said Robert B. Zoellick, World Bank President, at the end of the meeting.

The World Bank chief is traditionally selected by the US President and is based in Washington.

The BRICS statement published following this week’s meeting called for a “merit-based” system of election instead to water down Western influence.

“We therefore call for a more representative international financial architecture, with an increase in the voice and representation of developing countries…that can serve the interests of all countries and support the development of emerging and developing economies,” read the BRICS statement released after the meeting.

There was opposition at the UN climate talks in Durban last year to suggestions that the new $100bn Green Climate Fund (GCF) also be based in Washington.

Developing countries called on the GCF to be based in a “more global environment”.

No decision has been made.

The post Developing countries look for fairer sustainable development funding appeared first on Climate Home News.

Bill Gates called for more investment in hi-tech agriculture at Davos (Source: WEF)

The World Economic Forum is meeting in Davos, Switzerland, this week, RTCC looks at the key climate change messages to take away from the summit. 

Bill Gates is loaded, but he’s not rich enough to do it all

Bill Gates had two messages at Davos. He announced a $750 million donation to a global fund to fight AIDS, malaria and tuberculosis.

He also called for more investment in high-tech agriculture to stave of an impending food security crisis accelerated and exacerbated by climate change.

The Stern Review estimated the cost of mitigating for climate change at 2% of global GDP, $1.25 trillion in real money. Even the Bill and Melinda Gates Foundation can’t spring for that kind of cash.

Without business, the UN climate change process will fail

Bill Gates’ financial shortcomings brings us nicely to the message from UN climate change chief Christiana Figueres.

She told the WEF that the process started in Durban, for a global deal on reducing carbon emissions, was dead without the input of the private sector.

To underline how business can do its part, the UNFCCC launched a database of 100 case studies showing how firms, including Coca-Cola and Intel, are reinforcing their business for a changing climate.

Figueres told leaders gathered in Davos that UN climate talks would collapse without the involvement of business (Source: WEF)

…but without Governments, business won’t be interested

Figueres is spot on, but business will only step in under certain conditions. Regulatory and financial support are high on that list.

UK Development Secretary Andrew Mitchell told leaders gathered in Davos that his Department would be contributing £110 million in seed capital to a private-public partnership fund with the goal of raising £3 billion in total for renewable energy in emerging economies.

Add this financial commitment to a steady regulatory environment and the private sector will be happy to play its part.

Climate change can create unlikely allies

Pakistani Prime Minister Yousaf Raza Gilani raised eyebrows in Davos when he opened the door to collaboration on climate change issues with India.

He described the cycle of drought and flooding in the country as “horrible” and when asked whether the two could work together he said: “Yes, certainly there can be cooperation. We have [an] excellent relationship with India and we want to work together”.

Climate change impacts tend not to discriminate against national boundaries, it only makes sense that the solutions don’t either.

Food is going to get more expensive

Not a new message but it resonates when it comes from the CEO of Unilever.

As well as selling a lot of food, the consumer goods conglomerate also buys a lot of raw food-stuffs and is acutely aware of how the market works.

“The two key drivers are that food demand is rising, and thanks to unsustainable farming and climate change events, the world is running out of good fertile land for agriculture,” said Paul Polman.

New democracies need new environmental policy

A new ranking of Environmental Policy released at Davos placed Iraq rock bottom.

The Environmental Performance Index (EPI) by Yale and Columbia Universities in the US, in partnership with the World Economic Forum, recognises the special circumstances in Iraq.

Coal-burning central Asian states were also picked out as poor performers.

Russia finished 106th out of 132 countries.

“You see severe breakdowns in the environmental health category. This is a category where a lot of countries have experienced gains over the last decade, but for Russia, they have been experiencing severe declining trends in air quality,” Angel Hsu, project director of EPI.

The post Davos 2012: What have we learnt? appeared first on Climate Home News.

Former UNFCCC chief Yvo de Boer says private investment is key to fighting climate change (Source: World Economic Forum)

The fight against climate change is dependent on private sector money, according to former UN climate change chief Yvo de Boer.

Speaking at the Nordic Council meeting de Boer said public-private partnerships were a good way to ensure that sustainable investments continued to flow.

“The bulk of investment in sectors relevant to climate including energy are private rather than public,” said de Boer, now KPMG’s Special Global Advisor on Climate Change.

“Unless we can get private investments going in the right direction then we are in big trouble.”

De Boer said that while public-private partnerships were helpful, it was essential that a compelling case was made for sustainable economies globally.

“You need a specific sustainable growth story for Norway, Mali, the US. It’s only when politicians, business people and voters see that sustainable growth can be made to work for their country, that they’ll believe it is possible,” said de Boer.

“To some green growth means only investing in green technology. I believe it means growing your economy in a more sustainable direction,” he added.

At the latest round of UN climate change negotiations in Durban, there was opposition to the private sector having too much control of future climate action. Critics claimed this would put profit before people. The issue was central to the brief ‘Occupy‘ protest at the end of the conference.

The post Former UNFCCC chief: Private sector investment essential for climate fight appeared first on Climate Home News.

The Green Climate Fund stimulated fierce debate in the main plenary session on Wednesday (Source: UNFCCC)

By John Parnell
RTCC in Durban

The US and Japan joined a chorus of objections to the $100bn Green Climate Fund’s proposed design during a heated session in Durban.

Issues over the use of private sector money and controversial fundraising mechanisms such as the financial transaction tax dominated discussions.

The US and Japan has stated categorically that they do not want to hold any discussions over a single source of funding, such as the so-called Robin Hood tax on banking transactions. Instead they insist that each individual country should be allowed to raise its share of the GCF. This national approach would also appear to rule out a system of international levies on shipping or aviation progressing in Durban.

Meanwhile a diverse range of parties including Venezuela, Saudi Arabia and Egypt objected to the use of private sector money for the fund, which it is hoped will be worth $100bn per year by 2020. The current so-called fast start finance is worth $10 billion a year till 2012.

Less developed nations are also concerned that the use of private sector finance could see control and outcomes of projects farmed out to the corporations sponsoring them, rather than being in the hands of the governments on the ground.

“There’s a huge gap to close,” said Ilana Solomon, senior policy analyst with ActionAid USA. “The big question is whether discussions will continue productively or unravel.

“The good news is that despite their differences, all parties want to see progress,” said Solomon.

This statement was backed up by US negotiator Jonathan Pershing who has described the GCF as potentially “a major global institution for climate finance…if it is designed properly”.

The fate of the GCF will now be decided behind closed doors, although COP17 President Maite Mashabane sought to assure observers that this process would remain inclusive and transparent.

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The Thanet Offshore Wind farm is the largest in the world (Source: Jamie Cook/Vattenfall)

By RTCC staff

The world’s largest installed offshore wind farm will receive £150 million in funding from the European Investment Bank (EIB) in a deal announced today.

The long-term financing package represents a significant portion of the project’s estimated costs of £780m. The farm is owned by energy generator Vattenfall.

“The Thanet Offshore wind farm demonstrates how offshore wind can achieve economies of scale and make a significant contribution to renewable energy supply. The EIB is committed to supporting expansion of the offshore sector to increase experience and drive commercialisation of cutting edge technology,” said Simon Brooks, EIB Vice President for the United Kingdom.

The Thanet wind farm was opened in September 2010. Its capacity of 300MW makes it the largest offshore wind installation in the world.

It will be dwarfed however, by the proposed London Array scheme, which at a capacity of 1000 MW, is the largest consented offshore wind project in the world.

The UK has pledged to source 15% of its energy from renewable sources by 2020. The scale of investment from the EIB will be welcomed by the renewables industry as it seeks stable government policy and long-term financing.

Thanet Offshore in numbers

200,000 – Average number of homes powered by the project

100 – The number of Vestas V90 turbines installed

115 – The height of each turbine in metres

35 – The area the farm covers in square kilometres

780 – The cost of the project in million of UK pounds

0 – Number of offshore wind farms generating more electricity than the Thanet scheme

Source: Vattenfall

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UNFCCC chief Figueres will be hoping increased transparency brings commitments to the Green Climate Fund (Source: UN Photo/Paulo Filgueiras)

By RTCC staff

The UNFCCC has launched an online portal to reveal how the $30bn fast-start finance is being distributed.

The UNFCCC portal will allow anyone to track how money is being distributed from the fast-action climate fund, which is designed to channel money to from developed nations to those most vulnerable to climate change between 2010 and 2012.

“When governments meet in Durban for the UN Climate Change Conference, it is important that they understand the extent to which climate finance has been provided by developed countries,” said UNFCCC Executive Secretary Christiana Figueres.

“This information is key to understanding how and where the finance is being provided, and by whom. It allows for transparency and trust-building among governments on the fulfilment of financial commitments and the projects supported by the funds, which benefit people in developing countries,” she added.

“There are important lessons that can be drawn from fast-start finance both in the delivery of long-term finance and the monitoring, reporting and verification of support,” said Figueres.

“Governments now need to indicate scaling up of finance beyond 2012,” she added.

Despite the progress, an anti-corruption group has said more must be done to ensure developed countries cannot count existing aid donations as contributions to the fund.

“Firstly it would be important to say that we’re very pleased that the UNFCCC has begun tracking climate finance centrally. A lack of clarity over the definition of ‘new and additional’ funding has led to considerable discretion on the part of developed countries to report as they choose,” said Alice Harrison, communications coordinator with Transparency International’s climate governance integrity programme.

Harrison praises the UNFCCC for making the data available publicly and for making the “first steps” towards meaningful transparency. However, there remain concerns over the reporting criteria.

The fast-start finance will be superseded by the Green Climate Fund with $100bn available from 2020. Both will be up for further discussion in Durban.

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Investors will be watching the results of COP17 closely ahead of the Green Climate Fund (Source: Rafael Matsunaga)

By John Parnell

As one of the most powerful groups lobbying for improved climate change legislation, the financial world is proving to be a key player in prising open funds for mitigation and adaptation.

With the development of the Green Climate Fund second only to Kyoto on the agenda in Durban, expect to hear even more from the finance and investment lobby at COP17.

Banks also have a record of leading the way in corporate and sustainability measures. They were early movers in carbon disclosure and many have integrated these into their everyday business operations, from the offices they work in to the products they offer clients.

The Lloyds Banking Group has set ambitious targets for energy efficiency and is making operational and logistical changes to its operations.

“We have a concept called ‘no travel week’, every month, in the third week there’s no travel permitted,” says Paul Turner, Group Community Investment & Sustainable Development Director at Lloyds Banking Group.

During this week staff do not visit colleagues in other offices, instead opting for video conferences and other alternatives.

“We found that it doesn’t spike in the week before or after, it truly is avoided. That not only reduces our impact, it also saves us a lot of money so it makes great business sense.”

This means doing more than installing energy efficient light bulbs (which they’ve done incidentally). The group screens all loans above a certain threshold with an environmental impact assessment. Its auto-leasing operation has adopted energy efficiency at its core and it has ramped up interest in funding clean energy ventures.

Lloyds has invested in around ten renewable projects a year for the past four years with a total investment of £2.5 billion. This is significant. To put this into context, this is about half what the UK government has set aside to seed the Green Investment Bank.

The greater role for banking and investment lies in its ability to finance the huge volume and scale of projects necessary to keep warming below two degrees. The effect of the industry’s lobbying of governments cannot be underestimated. Cynics will say there is nothing altruistic about these calls. So what? The result will be the same regardless of the motive.

The International Investors Group on Climate Change (IIGCC) represents €6 trillion of assets and largely wants precisely the same results as many other environmental groups from other backgrounds.

“What we are looking for from policy is that it shifts the risk/reward balance away from high carbon to low carbon assets,” says Stephanie Pfeifer, executive director, IIGCC.

“It’s really critical that policies supporting these have the appropriate duration so you’re considering the longer-term timescale. What’s been happening quite a bit recently is that policy changes have been made retroactively. That will damage investor confidence. That’s very difficult to restore,” says Pfeifer.

Germany is an excellent example of steady, consistent policies enabling growth and providing investors with the confidence they seek.

“If there are any changes needed to policy, for example in response to falling technology costs, there must be a path that shows investors how things might change and when they might change. This has to be clearly signalled before the investment decision is taken,” she adds.

Having said this, she is acutely aware of the balancing act governments have to perform in a time of increasing austerity measures.

“We recognise that governments feel the need to be flexible. They will react to changes in economic conditions, in climate and of course they are very aware of the electoral cycle,” claims Pfeifer. “Investors will be looking at how governments legislate, whether they have invoked retroactive policies in the past, how economically sustainable are their policies?”

So what financial policy would she like to see develop in Durban?

“An international framework would help with investor confidence. So we are very supportive of the UNFCCC process,” she says. “I think there is still a lack of understanding of the role that private sector capital can play.”

Pfeifer says the IIGCC and other investor groups will be providing a private sector perspective on the Green Climate Fund during the negotiations, a potential centrepiece of this year’s talks.

“We have done some work on risk reducing mechanisms, guarantees, the kind of thing where public sector money will leverage private sector investment. Those discussions will probably be ongoing in Durban,” says Pfeifer.

With a new report highlighting a $23.5 billion hole in public funding for adaptation and mitigation, private money could prove even more important As far as climate finance goes, it looks like it will be the banks bailing out the government’s shrunken climate funds.

The post Have bankers won the moral high-ground on climate change? appeared first on Climate Home News.

Start-up cleantech and green businesses lack funding.

By John Parnell

Micro-sized green businesses are struggling to source investment as private and public money flows to larger companies, an entrepreneur has told RTCC.

Credit has become difficult to find for all, from consumers to the upper reaches of the corporate world and even certain governments. However, as Prime Minister David Cameron pointed out in a speech earlier in 2011, small and medium sized enterprises (SMEs) are responsible for 50% of business turnover in the UK. Their share of private and public sector investment appears disproportionately small.

Despite much rhetoric about investment in a green economy, firms in the middle stage of development have a range of funding sources available, finding the seed capital to get off the ground can be difficult.

“Even after we won what is essentially a UK government contract for £330,000 over two years, we still couldn’t get an overdraft, not even for £500,” says Andreas Zachariah, CEO of start-up Carbon Hero. The company is developing an app, Carbon Diem, which detects your mode of transport and uses GPS to measure your carbon footprint from travel.

Despite Andreas’s business knowledge gained from a career in the city and the company’s award winning history, attracting private investment remains tough.

“The other problem you find is the scale of investments venture capitalists are interested in. Typically they are not interested in projects under £1m because they think the paperwork and the administration is not worth the trouble,” claims Zachariah.

With these channels unavailable Carbon Diem has relied on grants and prize money thus far.

“Our first funding was as a consequence of winning a Galileo Masters award in 2007. We were invited to pitch to the European Space Agency, which resulted in our first contract. As a consequence we moved to Holland for a year.

“Then we were contacted about the Technology Strategy Board (TSB). They were running a competition for intelligent and informed personal travel projects. We put together a tender for the TSB grant and that has been supporting our R&D exercise for the last two years. They took a risk and we are eternally grateful to them for doing that,” says Zachariah.

Dr Nick Gostick is the managing director of Inntropy, operator of the Nottingham CleanTech Centre, an incubator for small green business. He believes that tax breaks and other incentives could be used to encourage venture capitalists and entrepreneurs to invest in small companies.

“The involvement of incubators in the process can help as they will know the start up, have a business relationship with them, and so can condense a lot of the expensive due diligence,” says Gostick. “Another option is to force the banks kicking and screaming into the sector. At the moment they have no interest in the sort of technology start-ups that this country needs to repair the damage that the banks have done.”

The banks however, have traditionally become involved with companies at a later stage once much of the risk has been removed. Start-ups can help with this process by doing the due-diligence mentioned by Gostick and through thorough business planning.

“We see a number of really encouraging small businesses coming forward with great ideas, but we do encounter a number of entrepreneurs that come to us with an idea but without a robust business plan,” says Paul Turner, group community investment and sustainable development director at Lloyds Banking Group.

“That makes it very difficult for us to assess them. There is certainly space for more philanthropic equity. When they’ve got a great idea but they need help developing it that’s when they would really benefit. We can come into the equation better when the idea is developed and it is bankable,” says Turner.

This does not relieve the frustrations of Zachariah who says he also feels excluded from the UK government’s flagship Green Investment Bank (GIB), which has stated its intention to pump money into more developed enterprises.

“I suspect there will be an awful lot of PLCs helped by the GIB that have the public markets open to them, the banks and their shareholders at their beckon call,” he says.

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Offshore wind projects are set for a windfall from GIB (Source: Vestas)

By John Parnell

The UK’s Green Investment Bank (GIB) was touted to play a huge role in moving the country toward a low-carbon future while boosting the economy at the same time.

However, those involved in the scheme say a delay in the public-owned bank’s ability to borrow from other institutions to top up its initial pot of £3 billion, could delay and downscale its achievements.

“The treasury has effectively turned round and said it will allow the GIB to borrow, once the economy has recovered,” says Ed Matthew, programme director of Transform UK, which lobbied for the creation of the GIB and has is involved in consultations during its development. “We think they have got it badly wrong. This is exactly the kind of borrowing that should be prioritised.”

Matthew cites the bank’s ability to create jobs and cut emissions simultaneously, by funding small loans to enable homeowners to improve energy efficiency. A similar scheme in Germany created almost 300,000 jobs.

The delay in borrowing limits the GIB’s finances to £3bn until 2015 or until the deficit ahs been cut by a percentage point of GDP.

“There has been some resistance from the treasury. They have been trying to set up a fund instead, which would have been a time-limited pot of money. In our view that just would not have done the job,” says Matthew. “The idea is we create an enduring institution that is there to provide the best financial advice to government on how to support the shift to a low carbon economy. We have had a big fight with the treasury. It’s been very difficult for them. They are locked in this ideological dungeon where they have never countenanced the creation of a public bank in this country before.”

Edinburgh-based wave energy firm Aquamarine is developing near shore technologies for power generation. The technology has passed though initial trial and is in the middle stages of its development. Precisely the point at which the GIB looks to provide stimulus.

“If you look at the paper by BIS on the design of the GIB it doesn’t see marine energy as an investment prospect until at post 2015,” says Neil Davidson, public affairs manager, Aquamarine. “Our point of view is post-2015, the sector will probably be in a position to get money from a private bank anyway, so why would it then want to go to the green investment bank?”

Aquamarine has already become the first marine energy firm to secure private sector debt via a £3.4million loan from Barclays Capital. The company has also received backing from the utility firm SSE and technology manufacturer ABB.

Davidson believes the sector is perfectly placed to receive support from the GIB from its launch and that the investment from Barclays represents a seal of approval.

“Every pound of UK grant money, has leveraged more than £5 of private sector investment,” says Davidson.

“We recognise that the UK government is extremely stressed in terms of its finances but on the other side if the coin it is also looking for opportunities for growth. Here’s a sector that is aching to expand. We believe this is a real opportunity for the GIB to get its feet wet, and make a big difference.”

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