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How mainstreaming climate change can draw finance to sustainable infrastructure?

June 27, 2017 por Claudio Alatorre - Benoit Lefevre 2 Comments


Climate Action in Financial Institutions – http://mainstreamingclimate.org –

 

Clean energy, lower emissions, green jobs, adaptation and resiliency can be an opportunity for sustainable growth in developing and emerging countries where climate change is a threat to sustainable economic development.

To create these opportunities and mitigate climate risks, decision-makers need to integrate their climate change plans with national development agendas into nationally determined contributions (NDC) to reduce carbon emissions. But as they set out to reflect these commitments in planning and budget processes, national and sub-national governments face the challenge of how to best direct investments and set their economies and societies on low-carbon, climate-resilient development pathways.

With 70% of the forecasted increase in emissions from developing countries set to come from infrastructure that has yet to be built, decisions made today will determine whether the Paris Agreement and Sustainable Development Goals remain viable. In Latin America and the Caribbean, decisions surrounding infrastructure investments are especially significant. The demand for infrastructure is rising fast as citizens demand improved sanitation, energy and transport systems. At the IDB, we estimate that up to 5% of the region’s GDP, or roughly $250 billion per year, will be required to meet this demand.

Since dealing with climate change is both a matter of finding additional resources and a new way of decision-making, financial institutions have a key role in addressing those risks, as well as financing the shifts in market demand and supply to leverage opportunities of sustainable growth and increased resiliency.

Financial Institutions can play a pivotal part in directing and scaling up financing toward investments and assets that are necessary for transitioning to low-carbon, resilient economies by demonstrating  the opportunities, and potential returns of investments to the market.

In the case of Latin America and the Caribbean, recent catastrophic floods in Peru, Colombia and Argentina underscore the urgent need for more sustainable infrastructure. At the IDB we are currently piloting a new methodology to evaluate and integrate planned operations for climate risk, into infrastructure investment decision-making.

To support countries’ efforts to implement their commitments under the Paris Agreement, the IDB has launched NDC Invest, a one-stop-shop aligning IDB Group resources to help countries transform their climate commitments into investment plans.

Based on practices implemented by financial institutions worldwide, 26 public and private financial institutions have worked together to build a consensus around five voluntary principles to effectively incorporate climate change considerations into their strategies and operations. This process is often referred to as “mainstreaming climate change.”

The idea of “mainstreaming” implies a shift from financing climate activities in incremental ways, to making climate change – both in term of opportunities and risks – a core consideration and a “lens” through which institutions deploy capital.

Launched in Paris during the COP21, these Five Voluntary Principles aims to support and guide financial institutions moving forward in the process of mainstreaming climate change for better adaptation and promotion of climate smart development through the following actions:

  • Commit to climate strategies
  • Manage climate risks
  • Promote climate-smart objectives
  • Improve climate performance
  • Account for your climate action

Since COP 21 in Paris, the coalition has gained momentum and has recently launched the “Climate action in Financial Institutions – Principles for mainstreaming climate action” initiative. The initiatives will focus first on four priority areas:

  • Climate risks: approaches, tools and methodologies
  • Mapping reporting initiatives and understanding implementations challenges
  • City-level climate smart approaches and financial instruments
  • Spreading a climate strategy into a whole organization

 

The objectives of the initiative are to provide public and private financial institutions an opportunity to learn from each other, to disseminate good practices and lessons learned, and to collaborate on areas of common interest to support the development of new approaches. The IDB is committed to actively participate in this initiative and thereby contribute to reaching its goal.


Filed Under: Climate change

Claudio Alatorre

Claudio Alatorre es especialista senior en cambio climático en la División de Cambio Climático del Banco Interamericano de Desarrollo. Es el responsable de coordinar la participación del BID en dos fondos internacionales dirigidos a la mitigación del cambio climático en energía y transporte. En el pasado ha trabajado con agencias multilaterales y bilaterales, instituciones de gobierno, instituciones académicas, organizaciones no gubernamentales, empresas privadas y medios de comunicación, en el diseño de estrategias (normativas, institucionales y financieras) para la transición energética. Claudio estudió Ingeniería Civil en la Universidad Nacional Autónoma de México y un Doctorado en energía en la Universidad de Warwick, Reino Unido. Es también egresado del Programa LEAD.

Benoit Lefevre

Benoit Lefevre, PhD is an urban economist and an engineer in agronomics working as a senior specialist at the Climate Change division of the Inter-American Development Bank (IDB), currently based in the country office of the Dominican Republic. His work focuses on design and implementation of national and local policy and investment in all sectors of the bank, and on improving climate friendliness of IDB-Group operations for both mitigation and adaptation, leveraging climate finance and catalyzing private investment in clean and resilient solutions. Prior to joining the Dominican office of IDB, Benoit worked at IDB Headquarter in Washington DC where he led or participated in operations on transport, energy, cities and natural disasters in Mexico, Costa Rica, Guatemala, Panama, Colombia, Haiti, Dominican Republic, Peru, Ecuador, and Paraguay. Benoit also represented the IDB in the MDBs joined Working Group for Mitigation Climate Finance Tracking, and in the IFI Technical Working Group on GHG accounting. Previously, Benoit worked for the World Resources Institute (WRI) as Global Director of Energy, Climate & Finance of the Center for Sustainable Cities. In this role he led activities on alternative business models, municipal finance, capacity-building, upstream project preparation, urban energy modeling and integrated transport-land use policies. Prior to joining WRI, Benoit was director of the Urban Fabric program at IDDRI and visiting scholar at Berkeley University. Trained engineer, he holds a PhD in economics and finance, and did his post-doctorate at Colombia University. Benoit was Lead-author for 5th Assessment Report of the IPCC. He is author of 5 books, several academic papers and opinion columns.

Reader Interactions

Comments

  1. Leni Berliner says

    June 30, 2017 at 9:38 am

    The IADB Group could help mainstream climate finance by helping countries overcome the “good project-bad country” dynamic, by taking steps to raise countries’ ratings, thereby opening up more sources of financing. And for those countries with investment grade ratings for their sovereign debt, the IADB Group could strengthen municipalities ability to raise debt.

    Reply
  2. Tony Phillips says

    July 31, 2017 at 7:04 pm

    Very little of IADB financed infrastructure is in fact “citizens [who] demand improved sanitation, energy and transport systems” most of the infrastructure investment is similar to the general IIRSA plans which is not at all about “citizens” but about businesses — particularly those producing primary products for export to asia (i.e. most of the ‘ejes’). Citizens rarely get IABD funding unless a gas pipeline or a lot of sybean trucks just happen to come through their town. Please! Let us (as South American economists) not be disigenuous or nobody will believe us that matters.

    Reply

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This blog is a space to reflect about the challenges, opportunities and the progress made by Latin American and Caribbean countries on the path towards the region’s sustainable development.

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