Greening economic growth is the only way in which sustainable, inclusive development can be achieved that will satisfy the basic needs of 9 billion people and provide them with equal rights to material prosperity. A key challenge is the urgent need to reduce carbon emissions to avoid the catastrophic impacts of global warming. Another imperative is the need to increase natural resource productivity to meet unprecedented demands for clean water, food and urban development. The World Economic Forum’s Climate Change Initiatives are addressing these needs through convening public, private and civil society leaders to advance innovative public-private solutions. We then share these new models with international processes and national governments to accelerate scale-up and replication.
A high-level private session brought together 100 global leaders, including CEOs, Heads of State and heads of international and civil society organizations. Together, they explored the current green investment market context, challenges and opportunities, highlighting recent analyses of global investment flows by region and market sector. The participants then reviewed proven and new ways in which governments can attract green investment by showcasing ongoing country pilots in key emerging economies. Finally, they discussed how to catalyze leadership by using the Alliance to scale up and replicate successful approaches through both international processes and bottom-up action.
The session provided an overview of global investment in green growth infrastructure, drawing from the new Green Investment Report released in Davos. Participants welcomed remarks from United Nations Secretary-General Ban Ki-Moon, who testified to the value of public–private coalitions to deliver finance, and congratulated the Alliance on its progress. Discussions reinforced the urgent need to increase private sector investment in green growth, and highlighted the opportunity to use catalytic quantities of public sector finance to leverage private investment. The Chief Executive Officer of the International Finance Corporation announced the first financial closure of the new US$ 500 million Catalyst Fund, which will seed and stimulate equity investments in green infrastructure in emerging markets. The Fund was sparked by discussions in Davos last year, and provides a powerful example of the Alliance’s impact in attracting new investors to the green investment space.
Developing an action agenda to unlock private finance for green growth
The discussions identified a series of new and action-orientated proposals that will be supported by the Alliance in 2013 to advance the green financing agenda. These included:
- The design of a standard renewable energy power purchase agreement for emerging markets. This would ensure projects meet the criteria of development and commercial financial institutions and speed up the pace at which infrastructure projects can be financed. The structure will be applied first in Kenya and then, potentially, in Mongolia.
- The development of a new policy risk insurance product to support investment in green infrastructure by covering commonly encountered regulatory and policy risks.
- Delivery of a tiered fund to provide affordable capital for energy efficiency projects, drawing together finance from development and commercial banks supported by equipment providers and international corporations. Work will start immediately to define the concept and a roadmap for delivery, with the first pilots targeted for Mexico and Russia, with ties to the G20 in 2013.
- The Alliance’s partners announced a new collaboration to pool corporate demand for renewable energy, including a growing number of Indian and international companies. Pooling will establish fixed demand, support delivery of additional power capacity and establish preferential costs for power. Collaboration will start in India and then be extended to other areas.
- Further development, selection and execution of potentially catalytic proposals to finance a low carbon and resource efficient agriculture sector. The select finance instrument(s) will first be applied in Vietnam, with an outlook to assess replicability in other agriculture-heavy economies such as Brazil and Tanzania.
Key messages from the session
- There is great potential and opportunity to use public sector finance to leverage private investment
- The new IFC Catalyst Fund will seed and stimulate equity investments in green infrastructure in emerging markets
- The Green Growth Action Alliance will oversee the design of a standard renewable energy power purchase agreement for emerging markets and a new insurance product
- We will also start work on defining a concept and roadmap for a tiered fund to provide affordable capital for energy efficiency projects.
The World Economic Forum and the United Nations Framework Convention on Climate Change (UNFCCC) have concluded a new partnership to launch a pillar on innovative financing for climate change under the UNFCCC “Momentum for Change” Initiative. “Momentum for Change: Innovative Financing for Climate-friendly Investment” builds upon the results of the UNFCCC’s larger Momentum for Change initiative, which was launched at last year’s UN Climate Change Conference in Durban, South Africa, to highlight public-private partnerships that are addressing climate change and have the potential to be expanded and replicated. It will also benefit from the Forum’s Green Growth Action Alliance (G2A2) which includes over 50 of the world’s largest energy companies, international financial institutions and development finance banks working to deliver greater investments into clean energy, transportation, agriculture and other green investments.
The Forum will co-host a high level session to launch the partnership with UNFCCC in Doha, Qatar, on 6 December from 1 to 3 pm, in the Qatar National Convention Centre. This will be a large event (1000+) that will bring on stage the Deputy Prime Minister of Qatar also acting as the COP 18 President, Abdullah Bin Hamad Al-Attiyah as well as Christiana Figueres, Executive Secretary of the UNFCCC. The session will showcase some examples of developing countries progress in attracting private investment for their green growth objectives such as Kenya and Vietnam and reaction from the business sector on how this can be achieved at scale.
In addition to this, the Forum has also agreed to partner with the Qatari government to organise an IGWEL style private session that will be chaired by the President of COP 18. This session will take place on 5 December, from 6 to 7:30 pm and will gather political, business and civil society leaders to engage in informal, roundtable discussion. The session would aim to generate practical discussion on the potential for scaled partnerships to help make progress on some key climate change mitigation and adaptation challenges, and support for some key initiatives and ideas where relevant. Ideas on how to build such activities into the architecture of the new climate framework would also be stimulated recognizing that a multilateral process involving UNFCCC parties remains an essential device to sustain international negotiations on addressing the complex issue of climate change.
Emerging economies are forecast to represent over 60% of global GDP by 2030, driving strong demand for energy, water, transportation, agriculture and urban development. At the same time, these countries face worsening environment and resource challenges like climate change and water security. Leading governments are addressing these challenges through green growth strategies designed to attract investment in sustainable water, energy, transport and agricultural growth. This creates an attractive opportunity for private sector investment: up to $1 trillion per year is needed, according to the 2012 B20 Green Growth Task Force. However, due to the limited track record of some technologies, combined with the perception of investment risk, private capital providers are reluctant to invest.
Since 2010, the World Economic Forum has been addressing this gap by piloting solutions, with the result of launching two donor-funded instruments that are now attracting private investment for solar power in India. The Forum is building on this success to bring together local and international private and public sector finance institutions with governments and project developers to co-design targeted solutions in Vietnam, Kenya and Mexico. In order to accelerate this work, leading companies from the finance, infrastructure, energy and agriculture sectors, joined with public finance institutions to launch the Green Growth Action Alliance (G2A2) at the 2012 G20 summit in Mexico. The G2A2 will build on early success to advance country pilots, unlocking financing for key technologies like renewable energy, energy efficiency, water infrastructure and sustainable agriculture/aviation biofuels.
Green Growth Action Alliance Working Groups
The G2A2 working group on Green Free Trade issued an Open Letter to the international community. The leaders of this working group reached out to other members of the G2A2 and green economy leaders and several companies are signatories. The letter refers to the G2A2 as a neutral platform for developing proactive solutions to these issues.
Other G2A2 Working Groups are advancing innovative solutions like pooling large corporate renewable energy purchasers in specific geographies and engaging long-term institutional investors to provide capital for green investment.
World Economic Forum Annual Meeting
22-25 January 2013
Green Growth Action Alliance Vietnam Workshop
World Economic Forum on Africa
7-9 May 2013
Cape Town, South Africa
World Economic Forum on East Asia
5 June 2013
2013 G20 Russia Summit
Global Green Growth Forum
UNFCCC Conference of Parties 18 (COP19)
World Economic Forum Annual Meeting 2014
22-25 January 2014
2014 G20 Australia Summit
Coordination of calendar, events and communication: Kiana Ranjbar, Team Coordinator; Kiana.Ranjbar@weforum.org