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Mobilising Climate Finance: a roadmap to Finance a low­‐carbon economy, Pascal Canfin


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Pascal Canfin, Co-­‐chair of the French Presidential Commission on Climate Finance, at the Our Common Future Under Climate Change conference, July 7-10 in Paris, France.

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Mobilising Climate Finance: a roadmap to Finance a low­‐carbon economy, Pascal Canfin

  1. 1. Mobilising  Climate  Finance:     a  roadmap  to  5inance  a     low-­‐carbon  economy     Presenta(on  of  the  report  of  the  French  Presiden(al  Commission  on  Climate  Finance       Pascal  Canfin   Co-­‐chair  of  the  French  Presiden2al  Commission  on  Climate  Finance  
  2. 2. I.  The  French  Presidential   Commission  on  Climate  Finance  
  3. 3. Presentation  of  the  Commission   President  Hollande  commanded  the  French  Presiden(al   Commission  on  Climate  Finance  -­‐  February  2015   Commission  co-­‐chaired  by  Pascal  Canfin  &  Alain  Grandjean   76  experts  interviewed  -­‐  financial  actors,  infrastructure  funds,   development  banks,  New  Climate  Economy,  UNEP  Inquiry…  -­‐     between  March  and  May  2015   Official  presenta(on  of  the  report  to  President  Hollande  &   Ministers  L.  Fabius,  S.  Royal  &  M.  Sapin  –  June  2015  
  4. 4. The  macroeconomic  bene5its  of  climate  action   v The  New  Climate  Economy*  demonstrated  that  the  extra  cost  of  climate   ac(on  is  limited  (5%)  and  we  will  be  economically  be^er  off  with  a   climate  ac(on  preven(ng  climate  disrup(on   v A  low-­‐carbon  investment  strategy  is  a  way  to  overcome  the  paradoxes  of   the  current  global  economy  context  illustrated  by  the  following  figure  :     Expansionist   monetary  policy   The  needed  investments   in  infrastructure  are    not  met   Tension  on  investors’   long  term  economic   models   The  New  Climate  Economy,  Be6er  Growth,  Be6er  Climate,  2014  
  5. 5. The  5inancial  package  of  the  Paris  Climate   Compact  is  articulated  around  3  pillars   Gedng  to  the  $  100  billion  annually  by  2020   Financing  for  adapta(on  for  the  most   vulnerable  countries   Sedng  and  implemen(ng  a  roadmap  to  finance   a  low-­‐carbon  economy   The  core  of  the  Canfin-­‐Grandjean  report    
  6. 6. v   WRI  analysis  (June  2015)  on  how  to  meet  the  Copenhagen  pledge   v Projec(ons  of  public  (bilateral  and  mul(lateral)  and  private  (leveraged)  finance   v One  of  the  key  findings:  $  10  to  $  15  bn  in  2020  of  addi(onal  bilateral  public   climate  finance  needed  to  get  to  the  $  100  bn       v Provides  a  poten(al  landing  zone  to  find  a  compromise     v In  line  with  Germany’s  annoucement  to  provide  2  billion  €  addi(onal  public   climate  finance    in  2020            Getting  to  the  $  100  billion  annually  by  2020  1   0 20 40 60 80 100 120 140 160 Private finance leveraged by MDBs climate finance (medium leverage) Adjusted MDBs climate finance (medium growth) Private finance leveraged by developed country climate finance (medium leverage) Developed country climate finance (medium growth) 2012 2020 17 31 21 39 28 15 39 21 137 Scenario 3: The Medium-Growth, Medium-Leverage Projection (source WRI, 2015)
  7. 7. v   State  of  play  on  adapta(on  finance   v Between  $  8  to  10  billion  in  2015  of  North-­‐South  flows,  including  $  4  to  5   billion  for  the  Least  Developed  Countries   v   Need  for  a  specific  adapta(on  package  for  LDCs,  that  could  be   ar(culated  around  the  3  following  elements   Financing  for  adaptation  for  the  most   vulnerable  countries   2   Resilience   •  Integra(on  of  climate   resilience,  in  par(cular   in  the  field  of   infrastructures,  by   donors  and  mul(lateral   development   ins(tu(ons;  in  line  with   the  G7  declara(on   (June  2015)   Insurance   •  Extension  of  exis(ng   programs  to  an(cipate   extreme  weather   events   •   Support  recovery  and   reconstruc(on  aper   natural  disasters   •  Insure  a  higher  number   of  people  against  the   consequences  of   climate  change   Public  finance   •  Financial  commitment   to  define  a  target  for   public  finance  for   adapta(on  in  2020  and   beyond,  dedicated  to   ‘LDCs,  Small  Island   Developing  States  and   Africa.’  
  8. 8.    Setting  and  implementing  a  5inancial                      roadmap  to  5inance  a  low-­‐carbon  economy   3   v   Provides  the  first  integrated  roadmap  to  finance  a  low-­‐carbon  economy   v   Translated  at  both  na(onal  and  interna(onal  level   v   Based  on  the  following  4  dimensions:     Carbon price signal Low-carbon and resilient infrastructures Mobilising development banks towards more low- carbon projects Financial regulation and mobilisation of private financial actors Financing a low- carbon economy
  9. 9. II.  Key  proposals  of  the  roadmap  to   5inance  a  low-­‐carbon  economy  
  10. 10. A 360° strategy to finance a low-carbon economy IMF Develop- ment Banks OECD G20 G7Basel Committee Financial Stability Board SCF (UNFCCC) UN office Secretary General A  360°  strategy  for  the  low-­‐carbon  5inancial   roadmap     1   v   Integrate  climate  into   the  radar  of  key   financial  actors  &   ins(tu(ons   v   Some  key  indicators   to  be  monitored  :   v   Carbon  price  signal   v   Share  of  green   investments  in   infrastructure   v   Decoupling  between   GDP  &  GHG    
  11. 11. Transition phase Transition phase Introductory Transformational Subsidised Price /tCO2 Period20302020 0 15 20 40 60 80 Establish  a  carbon  price  signal  2   v   Proposal  for  Cop21  :  Voluntary  commitment  by  a  group  of  developed   and  emerging  countries,  independent  of  the  UNFCCC  agreement   v   Common  and  clear  poli(cal  signal,  with  flexibility  of  price  and  horizon  
  12. 12. Integrate  climate  in  macro-­‐economic  models  3   Request  that  each  development  bank  develop   a  «  2°C  investment  »  roadmap     5   v   Inclusion  of  2°C  scenario  in  the  Finance  Ministries  and  interna(onal   ins(tu(ons  (IMF,  OECD…)  macroeconomic  forecasts   Development  of  national  strategies  to  5inance   the  decarbonization  of  economies   4   v   By  Governments,  beginning  with  developed  countries  and  then  emerging   countries   v   Specify  how  the  development  bank  intends  to  contribute  to  the  2°C   limit  :  investments  pa^erns,  equity  needs…   v   Joint  monitoring  process  of  such  roadmaps  by  mul(lateral,  regional  and   bilateral  development  banks,  presented  to  the  IMF  and  World  Bank    
  13. 13. Increase  the  use  by  development  banks  of   instruments  and  tools  with  higher  leverage   6   v   Such  as  guarantees,  subordinated  debt  or  credit  enhancement   Include  in  the  2016  G20  work  program  the       forthcoming  recommendations  of  the  FSB  on   5inancial  stability  and  climate  related  issues   7   v   As  a  follow  up  of  its  mandate  by  G20  Finance  Ministries  in  April  2015   Put  in  place  methods  to  include  climate  risks  in   stress  tests  for  banks  and  insurance  companies  and   measure  the  carbon  footprint  of  institutional   investors  portfolio   8   v   For  example,  following  France’s  recently  passed  legisla(on  (Ar(cle  48,   Energy  Transi(on  for  Green  Growth  bill**)  
  14. 14. Carry  out  an  assessment  of  5inancial  actors’   engagements  taken  since  the  New  York   Summit  in  2014   9   Adopt  the  methodology  developed  by  the  OECD   (2015)  to  analyze  the  alignment  of  public  policies   with  low-­‐carbon  development   10   v   Inluding  the  integra(on  of  climate  risk,  measuring  GHG  emissions   of  financial  ac(vi(es,  increasing  financing  for  green  economy   v   As  part  of  a  broader  «  Agenda  of  Solu(ons  »  that  is  also  linked  to   the  UNFCCC   v   Key  means  of  assessing  the  integra(on  of  progressive   decarboniza(on  targets  in  all  public  policies     v   France  and  OECD  members  and  partners  could  commit  to  this   framework  before  COP21  
  15. 15. Other  issues  subject  to  debate   Does  monetary  policy  has  a   role  to  play  in  the  allocaBon  of   capital  to  the  green   transiBon  ?     • People’s  Bank  of  China  :   mandate  from  the  Government   to  work  on  the    «  greening  of  the   financial  system  »   • Central  bank  of  Bengladesh  :   lower  risk  weigh  for  green  loans   • Other  examples  in  the  UNEP   Inquiry  reports  (Aligning  the  financial   system  with  sustainable  development   (2014),  The  coming  financial  climate   (2015))   Should  SDRs  contribute  to   finance  a  low-­‐carbon   economy  ?   • Allow  to  cover  more  conver(bilty   risks  to  finance  more   infrastructure  projects   • Bring  addi(onnal  equity  to   development  banks   • Incur  no  impact  on  the  deficit  or   public  debt  of  the  country   concerned     Monetary  policies   Role  of  SDRs  
  16. 16. Thank  you  for  your  attention  !  
  17. 17. **  Article  48  in  the  French  Energy  Transition   Bill  for  Green  Growth   v   In  May  2015,  France  became  the  first  country  passing  a   mandatory  carbon  disclosure  for  asset  managers.   v   According  to  these  new  legal  requirements:   v Companies  to  report  on  how  they  take  climate  change  into   account  and  implement  low-­‐carbon  strategies     v Ins(tu(onal  investors  to  disclose  their  porwolio  carbon   footprint  and  to  report  on  their  climate  risk  exposure  and   their  contribu(on  to  have  a  porwolio  in  line  with  the   transi(on  and  the  2°C  limit  
  18. 18. Details  of  article  48  amendments   1)  Listed  companies  shall  disclose,  in  the  annual  report  subject  to  the  vote  of  the  shareholders:   •  financial  risks  related  to  the  effects  of  climate  change   •  measures  adopted  by  the  company  to  reduce  those  risks,  by  implemen(ng  a  low-­‐carbon  strategy  in  every  component  of  their   ac(vi(es       2)  The  annual  report  shall  include,  in  addi(on  to  the  social  and  environmental  consequences  of  the  company’s  ac(vity  which  were   already  in  the  law  :   •  the  consequences  on  climate  change  of  the  company’s  acBviBes,  including  the  use  of  goods  and  services  produced   •  This  seems  to  imply  that  listed  companies  will  have  to  report  on  their  Scope  3  emissions.  As  for  other  amendments,  the  details  on   how  to  implement  this  provision  will  be  defined  in  an  execu(ve  order.       3)  Banks  and  credit  providers  shall  disclose,  in  their  mandatory  risk  report,  on  the  risks  evidenced  by  the  stress-­‐tests  that  are  regularly   implemented.   •  This  provision  is  not  specific  to  climate  risks,  but  it  is  completed  by  the  following:         4)  The  Government  will  submit  a  report  to  Parliament  on  the  implementaBon  of  a  stress-­‐test  scenario  represen(ng  the  risks   associated  with  climate  change,  at  the  latest  on  December  31,  2016.  This  applies  to  all  categories  of  risk  already  listed  in  the  risk  report   (credit  risk,  counterpart  risk,  residual  risk,  risks  induces  by  securi(za(on,  market  risks,  interest  rates,  opera(onal  risks,  liquidity  risk,   excessive  leverage).       5)  InsBtuBonal  investors  (insurance  companies,  public  ins(tu(ons,  public  pension  funds)  shall  include  in  their  annual  report,  and   make  available  to  their  beneficiaries,  informa(on  on  how  their  investment  decision-­‐making  process  takes  social,  environmental  and   governance  criteria  into  considera(on,  and  the  means  implemented  to  contribute  to  the  financing  of  the  ecological  and  energy   transi(on.     This  includes:   •  risks  induced  by  climate  change,  including  the  GHG  emissions  associated  to  assets  owned   •  the  contribuBon  to  the  internaBonal  goal  of  limiBng  climate  change   •  the  contribuBon  to  the  realisaBon  of  the  ecological  and  energy  transiBon  
  19. 19. Articulating  climate  5inance  and  development  5inance   Educa(on,  Crises     and  Conflicts,  Governance,   Rights,  Capacity  Building   …   Infrastructure  &  Energy,   Urban  Planning,  Natural   resources,  Biodiversity   …   Training   teachers,   women   empowerment   Building  schools,   health  centers…   Coal  fired  power   plants,  roads…   Solar  pannels,   energy   efficiency…   Agriculture Health   Climate-­‐ impacBng   (nega(ve   impact)   Climate-­‐ friendly   (posi(ve   impact)   Service     (unimpacted)   Infrastructure   (poten(ally   impacted)   climate-­‐ friendly   climate-­‐ impac(ng   Synergy   between   climate  and   development     Cover   incremental   costs  of   adapta(on  and   resilience   Cover   decreasing   incremental   cost  of   mi(ga(on   Limited  climate   dimension   Decisive  climate   dimension                    Development  finance   Climate   finance