Money is important. It has been a topic of division among climate negotiations, especially in terms of financing from developed countries to developing countries. With climate change impacting many forefront communities, it is impossible to wait for the negotiation outcomes. That is why more action on climate finance needs to take place. A climate finance panel was put together under the Global Climate Action track, sharing best practices of green finance from both the public and private sectors. However, I was only able to be present for the opening remarks because I needed to leave for the airport.
The session started with the speech from the Hon. Aiyaz Sayed-Khaiyum, Fiji Minister for Economy and Attorney General. He mentioned that in the next 20 years or so, the world economy will double and that infrastructure will more than double. However, if the infrastructures remain as they are right now, it is impossible for us to keep the temperature rise below 2 degrees. He highlighted that people see the target of the Paris Agreement, but there is much work to be done in linking the target and the urgency of the action, citing how Cyclone Winston killed 44 Fijians and wiped out a third of the Fijian GDP.
He then brought up market-centric approach for the transition into a carbon neutral economy, with finance as the vehicle, good law and governance as the support to the finance sector. The role of the state was to ensure that more work is done in the finance sector towards adaptation projects. However, he also noted the challenges of green finance – the difficult evaluation on long-term projects or even “invisible” projects that do not bring tangible outcome. As of now, there is no widely available economic indicator on the returns of green financing, thus creating a reluctance amongst the private sector to move towards green financing. This is where the government needs to come in.
Despite this issue, the overall outcome seems optimistic. He stated that the climate market is innovating, with a growth of 200 million dollars in green bond this year. There is also significant growth in terms of climate risk insurance. However, more efforts are needed in the market for de-carbonization. Concessional finance and risk finance needs to scale up and more focus needs to be added to blending public and private finance. The integration of domestic and international finance was also highlighted, alongside with more regulations on carbon pricing. He also stressed that the finance sector is an amazing mechanism for greater and faster climate, thus urging for a greater usage of the sector.
He called for a greater flow of technology and innovation towards developing countries. This is especially important for small island states like Fiji that lacks economy of scale and not be attractive to the private sector to take up new innovation. He mentioned that this is also where governments could intervene, citing the example of Fiji’s launch of the 100 billion Fijian dollars green bond.
Finance is an important apparatus in funding climate resilience projects and adjusting consumer behavior. Malaysia had also launched the world’s first green Islamic bond to fuel green growth recently in July 2017 (yay!). However, the overall awareness of the climate finance market is still not strong enough and there is much opportunity for growth and innovation.
Written and Photos by Xiandi
Edited by Varun