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Roadmap For Our Sustainable Finance Has Been Laid Out

Roadmap For Our Sustainable  Finance Has Been Laid Out
Participants of the Reserve Bank of Fiji’s Workshop on Sustainable Finance Initiatives at the Suva Holiday Inn on 1st September 2017. Photo: Monica Aguilar
September 03
10:44 2017

Tropical cyclones, flash floods and droughts seems to be an annual event for most countries, especially for our country nowadays.

In Fiji, predicting the weather was easy five years ago.

Nowadays, you would often find yourself waking up to a beautiful sunny day then unexpectedly greeted with heavy rain showers for a few minutes until the sun shines again.

Some people refer to it as “Climate Change” while others would call it “Fiji’s Moody Weather”.

Last year, Tropical Cyclone Winston took 44 precious lives and left damages costing us approximately USD$1.4 billion, which is 25% of our Gross Domestic Product.

This was said by Reserve Bank of Fiji acting governor Ariff Ali on Friday during the Workshop on Sustainable Finance Initiatives at the Suva Holiday Inn.

Despite the damages left by Tropical Cyclone Winston, our economy had expanded by 2% last year.

Mr Ali added a 4% growth is expected this year.

He said the Workshop on Sustainable Finance Initiatives is to create awareness on sustainable finance to generate discussions amongst one another; discuss the financial sectors’ possible response to financing needs; and to lay the foundations of Fiji’s roadmap to a sustainable financial system.

International Finance Corporation deputy treasurer Andrew Cross echoed the importance of the workshop.

Therefore the Workshop’s focus was to develop Fiji’s roadmap that intends to marry the national targets and plans for sustainable growth with the financing instruments from banking, insurance, capital markets and pension sector.

The issuance of Fiji’s first Green Bond is among the efforts in  developing this roadmap, said Mr Cross.

However,  the common issue faced by small islands states is the lack of bankable projects.

“There is a business case model now associated with most of these projects and extensive resource, knowledge and incentives go in the feasibility and viability of these projects.

“There is a market element to these projects,” said Mr Cross.

 

SOURCES OF CLIMATE FUNDS AND ACCESSING PRIVATE FINANCE

“There is plenty of capital in the world. There is plenty of money around. There are billions and trillions of dollars that can be used to finance infrastructure and green projects. But the challenge is getting that capital to flow,” said COP23 Presidency special adviser Martijn Wilder.

A few sources of climate finance comes from public finance, concessional finance and grants.

However, a key source of finance that needs to be further tapped into is the private sector.

“This is where there is a huge amount of money that is locked up in pension funds and investment funds in institutional banks.

“A lot of which is not being invested in the climate change space at the moment because there is low economic return to the private investors,” said Mr Wilder.

The main challenge is that many of the investors, particularly in the adaptation area do not receive immediate or full economic returns.

Private investors are interested in investing in climate change areas but the issue of the rate of return poses as a big challenge, he added.

Another challenge faced is finding good investments in the climate change sector that can deliver  good climate outcomes.

However, more efforts are needed in developing innovative ideas to make invested finance able to generate a large economic return.

Another challenge is the ability to blend finance.

“There is a lot of room for opportunities to be more creative in blending public, private and charitable finance.

“Also, using some of this finance to create more concessional alliance,” he added.

There is a need to bring the different institutions together to work more cooperatively.

An area that needs to be discussed more often is the need to provide high economic returns from development funds by financial institutions and development banks.

Mr Wilder added there is a lot of interest shown by countries around the world in developing their own National Green Banks.

 

WHERE IS THE MONEY GOING?

United Nations Pacific regional adviser Kevin Petrini emphasized the importance of bringing in people with climate change backgrounds to collaborate with the finance fraternity.

He says there is an estimate of an additional USD$2-3 trillion per year that is needed to implement the 17 Sustainable Development Goals (SDGs).

“With USD$115 trillion Gross Domestic Product globally, we are looking at a 2-3% aspect of that overall flow of funds verses what needs to be done for the SDGs,” said Mr Petrini.

During his presentation, he said there is about USD$100 billion contributed to the global economy from the fisheries and aquaculture sector.

Also, there is USD$3 trillion per year  from international shipping, gas extraction and coastal tourism.

However, the bad news is that we are not making much progress on ensuring access to affordable, reliable and sustainable energy for all, Mr Petrini added.

There is a lot of work that needs to be done in this space which is where global discussions on climate change takes place.

The United Nations Framework Convention on Climate Change makes an assessment every two years on the climate finance flow.

Approximately USD$714 billion average per year from 2013-14 is the current estimate.

Although this is a significant amount, it is a small context of wider trends in terms of global investment, he added.

Infrastructure and assets are at risk from impacts of climate change and poses serious potential consequences for the global economy.

About 33% of all global climate finance goes through development institutions.

Mr Petrini argued that divestment is good business.

“If we stick to our old ways of doing business then we cannot get into the new way, which is renewable energy, energy efficiency and other ways of reducing greenhouse gases,” said Mr Petrini.

He added that participants of the workshop will have to do the real work by embedding what has been shared into their day to day work, ask questions, get information and take action.

Presentations were made by representatives from the: International Finance Corporation, World Bank, Sustainable Banking Network, Indonesia Financial Services Authority, Asian Development Bank, COP23 Presidency, Global Green Growth Institute and the World Bank Group Global Knowledge and Research Hub in Malaysia.

The whole day workshop ended with participants discussing and presenting possible broad strategies and implementation plans to form the basis of Fiji’s Sustainable Finance Roadmap.

 

 

GLOBAL CLIMATE FINANCE CONTEXT (UNFCCC 2016)

Economic losses from natural catastrophes $181bn per year, according to Swiss RE 2016

Total Assets Under Management in 2014 $75tn (total value), according to Boston Consulting Group 2015

Real Estate Assets at Risk in 2070 $35tn (total value), according to UNEP FI 2016

Investment in Fossil Energy $1.6tn per year, according to IEA 2014

Global Total Climate Finance 2013/2014 (avg/year) $714bn

Cost of Energy Actions in the Intended Nationally Determined Contributions $1.1tn per year, according to IEA 2015

Infrastructure finance needs 2015-30 $6tn per year, according to New Climate Economy 2014

 

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