GEFI Insight Series - Climate and Nature Finance: Time for Action

2024 is meant to be the year for international climate finance. It was widely acknowledged that COP28 in Dubai and the Global Stocktake did nowhere near enough on finance – and in particular on the needs of emerging and developing economies (EMDE) – to manage the challenges of climate change mitigation and adaptation, and of the energy transition. 

This year’s international negotiations about biodiversity and nature will also highlight finance. A priority for the COP16 on the Convention on Biological Diversity, (CBD), taking place in Colombia in late October, will be monitoring progress on the Global Biodiversity Framework (GBF),i agreed at the previous CBD COP in Montreal, and exploring how public and private finance can be mobilised to deliver on the GBF.ii. 

One of the positive developments in Dubai (begun at COP26 in Glasgow, with the declaration on forests and land use) was a coming together of climate and nature agendas 

For example, there was both a Nature, Land Use & Oceans Day as well as a dedicated Food, Agriculture and Water one, at COP28.iii This closer co-ordination supports the views of the climate scientists, who recognised in their last UN assessment report (Sixth Assessment Report [AR6] in 2023iv)  the interdependence between the impacts of climate change and the state of biodiversity. The authors commented on “the interdependence of climate, ecosystems and biodiversity, and human societies”.v vi 

These international declarations are important. However, as the climate and nature crises become more acute, policymakers and decision-makers will increasingly be judged on their ability to deliver. Against this background, can 2024 generate a step-change in how international public and private finance address the twin crises? 

There are some grounds for optimism. UNFCCC party discussions in Dubai did produced one significant development on finance: that a New Collective Quantified Goal (NCQG) is necessary – to set a new climate finance goal with the provision of an overall framework for existing and new sources of revenue. To drive forward the process, COP29 this November in Baku, was agreed as the time when governments should report back on their finance plans, to contribute to the overall collective goal. 

It’s clearly early days for how the NCQG will play out in practice. But it does represent a step-change in ambition – going beyond the previous climate finance floor of $100billion per annum (where we should acknowledge that Global North governments failed) – on financial support for the Paris goals. And it has the potential to do more than that: 

  • providing a framework for new and innovative sources of revenue, for example, from expanded carbon taxes; 
  • aligning with the UNFCCC’s core objective of substantially more ambitious new national emissions reduction targets (the NDCs) within the Paris “ratchet cycle” concluding at COP30 in Brazil in 18 months’ time by incorporating the model of country finance platforms which emerged from the recent World Bank/IMF Spring Meetings in Washington DC; and 
  • it also chimes with the burgeoning climate and development reform agenda being driven by Global South leaders such as President William Ruto of Kenya and Prime MinisterM Mia Mottley of Barbados, prioritising the climate finance policies of the World Bank and the Multilateral Development Banks (MDBs). 

For nature and biodiversity finance, the most positive development has been the inclusion of financial responsibilities, targets, and policy alignment in the GBF, adopted in December 2022.  

Firstly, target 14 of the framework references the need to integrate biodiversity-related fiscal and financial flows into policies, regulations, planning and processes.vii Secondly, financial institutions, along with transnational companies, are required to monitor, assess and disclose on biodiversity impacts and dependencies (target 15viii). Some recent environmental regulations have seen the exclusion of financial institutions; not this time. Thirdly, there is a push to reduce harmful incentives, including subsidies, which are damaging to biodiversity.  

Target 18 aims for a reduction of at least $500 billion per year by 2030; these incentives are due to be identified next year.ix Finally, target 19 calls for the mobilisation of $200 billion annually for biodiversity by 2030.  

 In the nearer term, international financial resources from developed countries are slated to reach $20 billion annually by next year and $30 billion by 2030.x 

New and innovative sources of finance will be necessary to tackle the crisis in nature. One area where policymakers, in our view, should be working harder – and making common cause on climate and nature finance – is subsidies 

The scale of public money devoted to subsidies for oil, gas and coal remains (for all the rhetoric about reducing them at G7 and other international meetings over the last decade), a staggering $7 trillion, according to latest IMF figures. Alongside this, a 2022 study by The B Team and Business For Nature  estimated that at least $520 billion per annum was allocated to subsidise agriculture alone, plus other environmentally harmful subsidies in sectors such as forestry ($155 billion) and fisheries ($50 billion).xi The Paulson Institute valued subsidies harmful to biodiversity at between $274 and $542 billion, in 2019, while positive flows into biodiversity conservation were estimated to be $124 to $143 billion.xii 

The UN has the platform to move things forward on subsidies. The CBD later this year is expected to tackle existing subsidies which impact on nature. COP28 in Dubai included language on “phasing out inefficient fossil fuel subsidies” in the GST text, and we would like to see NCQG submissions take the opportunity to pick this language up. 

Other ways where climate and nature decision-makers might work together is carbon markets. There is long-established scepticism about the voluntary carbon market, given the lack of international common standards and its association with offsets. Despite this, there would seem to be a push for biodiversity credits which can provide nature-based solutions to emissions reductions; and the CBD in Colombia may make progress with relevant innovative financing instruments.  

FinallyFinally, and importantly, the UN climate and biodiversity processes can be mutually supportive for national policies and plans. In a recent high-profile speech in London entitled “Two Years To Save The World”, UNFCCC Executive Secretary Simon Stiell set out what’s at stake – above all, that a step-change in new and ambitious NDCs is essential. This autumn at COP16, governments are expected to submit their own national plans (National Biodiversity Strategy and Action Plans – NBSAPs – the equivalent to climate’s Nationally Determined Contributions – NDCs).  To date, seven countries and the EU have submitted NBSAPs.xiii 

Our new multi-polar world is in many ways becoming more dangerous, as conflicts around the world are sadly showing. But there is a more positive sign of the times: the leadership from a new generation of leaders in the South, such as  William Ruto in , Deputy President of Kenya and  

Mia Mottley in, She is the Prime Minister of BarbadosRuto and Mottley, who have been instrumental in promoting a common agenda of climate and development, and driving an overhaul of the IFIs and MDBs that are more in tune with the global challenges of the 21st century. Luiz Inácio Lula da Silva, President of Brazil Lula from Brazil will also play a central role, as Brazil chairs the G20 this year and COP30 in 2025. 

In short, this must be the year for transformative change on international climate and nature finance, and which can repair some trust between the North and EMDEs after past failures. As we describe, some of the stars may be aligning. The outcomes of COP16 and COP29 will be the litmus test; and as ever, it will ultimately be political will that counts. 

This guest blog was written for the GEFI Insights Series by Richard Folland, Carbon Tracker Initiative, and John Willis, Planet Tracker

Footnotes

i Convention on Biological Diversity – The Kunming-Montreal Global Biodiversity Framework – accessed 30 April 2024

ii Convention on Biological Diversity – COP 16 Colombia – accessed 30 April 2024 

iii COP 28 UAE  Thematic Program – accessed 30 April 2024 

iv IPCC Sixth Assessment Synthesis Report (AR6) – Climate Change 2023 – accessed 30 April 2024 

v IPCC Sixth Assessment Synthesis Report (AR^) – Summary for Policymakers (page 3) 

vi Planet Tracker – Nature’s role in a liveable future for all – a commentary on the latest IPCC report – 22 March 2023 

vii Convention on Biological Diversity – Global Biodiversity Framework – Target 14 

viii Convention on Biological Diversity – Global Biodiversity Framework – Target 15 

ix Convention on Biological Diversity – Global Biodiversity Framework – Target 18 

x Convention on Biological Diversity – Global Biodiversity Framework – Target 19 

xi Business for Nature & The B Team – Financing Our Survival: Building a Nature Positive Economy through Subsidy Reform – February 2022 

xii Deutz, A., Heal, G. M., Niu, R., Swanson, E., Townshend, T., Zhu, L., Delmar, A., Meghji, A., Sethi, S. A., and Tobin-de la Puente, J. 2020. Financing Nature: Closing the global biodiversity financing gap. The Paulson Institute, The Nature Conservancy, and the Cornell Atkinson Center for Sustainability. 

xiii Convention on Biological Diversity  National Biodiversity Strategies and Actions Plans (NBSAPs) – accessed 30 April 2024 


Highlights from Ethical Finance ASEAN 2024: Scaling Up Sustainable Finance

This year’s virtual Summit, delivered in partnership with the Asian Institute of Chartered Bankers and UNEP FI, evaluated the current position and urgent need for scaling up sustainable finance in the ASEAN region.  

SCALING UP SUSTAINABLE FINANCE IN ASEAN 

Aries Poon (Director, Head of Asia-Pacific Insights and Analysis, S&P Global Market Intelligence) kicked off the summit with a fascinating Economic Outlook for the ASEAN region. 

Further setting the scene, Mohammed Rashdan Mohd Yusof (Chairman, Energy Commission Malaysia) delivered the Opening Keynote, entitled Scaling Sustainable Finance in ASEAN. Tuan Rashdan who provided an overview of the current state of sustainable finance in the ASEAN region, highlighted some of the challenges and opportunities in scaling up sustainable finance in the region and outlined the role financial institutions and regulators can play in promoting sustainable finance. 

FINANCING THE ENERGY TRANSITION 

In a Country Profiles presentation Christopher de Vere Walker (Head of Power, and Utilities at Carbon Tracker Initiative) then shared some insightful data and analysis on the extent to which the power sectors in Indonesia and Vietnam align with the goals of the Paris Agreement, highlighting the risks and opportunities associated with the transition. 

The Financing the Energy Transition panel then considered the progress made to unlock investment and mobilise the funding required to successfully transition to cleaner and more sustainable energy sources. The panel was moderated by Dame Susan Rice (Chair, GEFI) and featured Amanah Aboobucker, CB (Chief Sustainability Officer, AmBank Group), Muhammad Rizal Azmi (Assistant Vice President, Business Development and Sales, Carbon Market, Bursa Malaysia Berhad), Martijn Hoogerwerf (Head of Sustainable Finance APAC, ING), and Helga Birgden (Global Head of Responsible Investment, Partner, Mercer). 

A SPOTLIGHT ON COP 

UN Climate Change High-Level Champion, H.E. Razan Al Mubarak, provided a summary of finance-related outcomes from COP28 and outlined what financial institutions in ASEAN can do to support the transition.  

This was followed by a COP Fireside Chat between Sagarika Chatterjee (Department Director, Climate Finance, UN Climate Champions), Azreen Idayu Zainal (General Manager, Sustainability, Securities Commission Malaysia) and Dr John Murton (Senior Advisor, Standard Chartered) who looked at the key COP28 outcomes for ASEAN from a climate finance perspective and expectations for COP29 in Baku. 

UNEP FI UPDATE 

An update on UNEP FI’s initiatives will then be delivered by Membership and Regional Co-ordination Manager, Maria Eugenia Sosa Taborda. 

SUPPORTING SMEs ON THEIR JOURNEY TO NET ZERO 

The Fireside on Greening Finance and Developing SME Resilience was moderated by Carl Chan (Director, Accuracy) and included perspectives from Nurul Syaheedah Jes Izman (COO, Pantas Climate Solutions), Moreen Joseph (Chief Sustainability Officer, UOBM, JC3), and Datin Dorph Peng, Deputy President (SME Association of Malaysia). The speakers discussed the extent to which SMEs are incorporating ESG principles in their business operations and highlight some practical actions are being taken by regulators, financial institutions and data providers to support SMEs on their journey’s to net zero. 

BEST PRACTICE APPROACHES TO FINANCING NATURE 

Candice Dott (Director of Market Engagement, Taskforce for Nature-related Financial Disclosure) provided an introduction to the TNFD recommendations and tools and an overview of TNFD adopters.

Nicole Kozlowski (Head of Engagement, Planet Tracker) then introduced Planet Tracker’s Nature Scorecard and shone a light on the performance of ASEAN corporates 

The Unlocking Finance for Nature-Based Solutions panel then reflected on the risks that nature and biodiversity loss pose to ASEAN economies, before covering the global / ASEAN best practice approaches to investing in nature and the latest developments in measurement and reporting.  The panel was moderated by Laura Canas da Costa (APAC Policy Lead, UNEP FI) with insights shared by Satya Tripathi (President, Global Alliance for a Sustainable Planet),  Andy Turnbull (Senior Investment Manager, Natural Capital, Federated Hermes), Datuk Jeffri Abd Rasid (Chief Executive Officer, Malaysia Forest Fund), and Jurgita Balaisyte (Vice President, APAC ESG & Climate Research, MSCI). 

OPPORTUNITIES IN ISLAMIC FINANCE 

We had two deep dive fireside chats on Islamic finance. The first, entitled Moving from Halal to Tayyib, heard from Omar Shaikh (Managing Director, GEFI), Shereen Osman (Senior Manager – Islamic Finance, PwC Middle East) and Salman Siddiqui (Investment Manager – Global Emerging Market Equities, Jupiter Asset Management) on the fast emerging Islamic sustainable finance movement. 

This was then followed by a second fireside, involving Stella Cox CBE (Managing Director, DDCAP Group), Shrey Kohli (Head of Debt Capital Markets, London Stock Exchange Group), and Raja Amir Shah Raja Azwa (CEO, HSBC Amanah), to discuss the role of Green Sukuk for Climate Action. This included an update on the International Capital Market Association’s practitioner guidelines on green and sustainable sukuk as announced at COP28. 

The Summit concluded with a Closing Keynote from Dr Zamir Iqbal (Vice President, Finance, and Chief Financial Officer, Islamic Development Bank), who looked at the role Islamic finance can play to help drive green economic growth in the ASEAN region.