Poet, Global Citizen
Hello. My name is Amber. You know… that magic light at dawn and dusk; that torch pine perfume; that healing medicine? Yes, that’s me… sometimes also called cruel ancient sap, famous for entombing prehistoric insects!
My Seventh Generation Message
PART II: INSPIRED BY BUSINESS AND FINANCE FOR 2016
The year 2016 marks a new era of global cooperation on climate change and sustainable development!!! Why Now– After 21 years of science-technology-business discussions and annual Conference of the Parties (COP) was this COP 21 ripe and ready to collectively and globally treat the root causes of climate change? What made this year so different? The simple answer is that we were all clearly, universally, undeniably “InSpired.” Indeed, we are becoming awake to our Naturally Intelligent future.
As I have outlined seven causes of inspiration and reasons for us to be inspired in 2016, I divided this article into three separate blogs. Part 1 can be found on Catherine’s Blog at World Post and covers the favorable political atmosphere, urgency, focused delegate action, and openness among all nations to compromise in reaching a climate deal.
Now I invite you to read Part II of my reflections on COP 21. This post is centered on business and finance inspiring our climate resilient future.
4. I imagine few participating in the World of COP 21 could help but be inspired by the tides of change in the business community toward new energy, clean technology, smart-connected urban development… Climate Deal or No Climate Deal. Ramping up to this COP 21, leading business organizations came to Paris solidly linked hand-heart-head together in a strong, unified coalition and with one clear voice. Result: An ambitious deal with actionable language, good for global business and our world society. Points included: Net zero greenhouse gas emissions well before 2100; increasingly more ambitious national and business commitments to unleash greater carbon innovation and investment the next five years; more meaningful carbon pricing and linking of existing markets; additional climate finance at scale; transparency and accountability in transactions; support for climate adaptation and resilience-building; and basic research sponsored by governments in the energy sector. We Mean Business Result: The international business community more visibly and more actively demonstrated their long term commitment to invent, invest, and initiate new innovations in technology, climate finance, and business models- all necessary to realistically build the new markets and make the switch to a new climate economy. The virtuous cycle has begun.
SHOW US THE MONEY?
Show us the money? Witness the RE 100 Network, a collection of the world’s leading multi-national companies who recently made commitments to go 100% renewable and carbon neutral ASAP. Witness some of the world’s largest companies (50% of Fortune 100) who invested in renewables and significantly cut their emissions, saving together nearly $ 1.1 billion USD in 2015. Witness the $20 million USD XPrize Energy Challenge sponsored by NRG to “Reimagine CO2” by developing cutting edge technologies that convert emissions from power plants and industry into building materials and alternative fuels. Witness the “Breakthrough Energy Coalition” instigated by Bill Gates and championed by other techno-philanthropists such as; Meg Whitman, Richard Branson, Mark Zuckerberg, and Tom Steyer. Wired This business-led coalition alone has already stimulated 20 countries, including the US, China, and India to sign a pledge that helps the impact investment community finance breakthrough innovation in electricity generation and storage, transportation, industry, agriculture, and energy efficiency. Imagine if this private sector breakthrough was also coupled with a public sector breakthrough in the re-allocation of government funding toward basic research in new energy, smart grids, and resource efficient agriculture. Now we’re talking “true magic light storm cloud breakthrough”…then suddenly scale is possible. In 2013 the US spent $5 billion USD on energy, compared to $31 billion USD in health care and $70 billion in defense research. What if for example, we flipped the $5 billion USD in energy /$70 billion USD in defense spending? What if for example, we concentrated on averting the root causes of war, conflict, migration (exacerbated by climate impacts) by investing in a new equitable future where everyone has access to clean water, energy, food, quality life… and no one needs to migrate from their homes? Now that’s inspiring!
GOING FORWARD, ALSO ON THE GROUND IN PARIS,
Going forward, also on the ground in Paris, witness the precious quality time most every leading business and sub-national city program gave to celebrating new social-sustainable innovations. The World Climate Summit featured an evening of Sustainia Innovation Awards, showcasing plastic banks in Latin America, solar power retreat centers-toys-towers (solar everything) in China, revolutionary energy-water innovations in the UAE, children’s clothes exchange in northern Europe, people-centric, walking cities in Chennai, India, solar-powered drip irrigation in Southeast Asia, and smart light rail transportation in Vancouver, Canada. There’s even an annual resource manual to follow for 100’s more top innovations in Sustainia 100.
Witness the literally1000’s + truly awe-inspiring clean energy technologies, business models, and strategies for financing a low carbon future throughout the COP 21 also at the Climate Generation Space panels, prize-driven forums, city presentations, and business discussions. Like visiting the Louvre no one could see, visit, experience, or be exposed to the overwhelming exhibition of new ideas from Around the World at COP 21. Worthy of mention was the focus of many innovation awards toward building capacity for the most vulnerable communities to respond to climate change. For example, the UNFCCC’s Momentum for Change Innovation Awards showcased “lighthouse activities” designed specifically for developing countries: to serve the urban slums, to empower local women at home, to generate climate-friendly finance, and to socially-charge cost-effective ICT solutions. Worthy of mention was also the UNDP’s colorful, star-studded Equator Prize Night, which celebrated 21 exceptional indigenous communities themselves leading with heart and passion on the frontlines of climate change. Inspiring initiatives born in local communities and coalitions around the world included: the Mayan peoples who successfully secured their land rights in Belize; the Papua New Guinean tribes who together protected their lands from unsustainable logging; the Rural Green Environment organization in Afghanistan who fought to sustain their healthy fishing industry; the Green Watershed project organizers in China who succeeded in protecting their mountain forest watershed for the Yi people; and the committed ecologists who restored Iran’s largest inland wetland feeding into Lake Urmia.
WITNESS UNEP AND CLIMATE ACTION,
Witness UNEP and Climate Action, who joined forces to focus their entire Social Innovation Forum program on the exchange of ideas, technologies, best practices between business and local government. They also hosted an exhibit showcasing the latest energy efficient urban designs, smart mobility, and clean energy ideas akin to a mini-CES for social innovation. In parallel, our well-known visionary innovators, like President Grimson of Iceland and Glen Schmidt of BMW introduced their Elon Musk- open source technology visions for building stronger national alliances and new business opportunities. Result: Everyone wins. BMW’s smart electric cars now represent 50% of the personal mobile transit in Norway, are connected to the uber-mobile city transport system, and are spreading across Europe. Geothermal energy technologies- “made in” Iceland are being exported to China, Ethiopia, and Mexico. Autodesk’s latest sustainability focused design tools are inspiring young developers to envision smart cities. Coca-Cola’s good citizen visions to convert plastic waste into products and deliver health and well being to neighborhoods on every local corner are being realized through EkoCycle and EkoCenter. Indeed, the global business community is rejuvenating the face of our communities; and soon these new technologies will become the new norms of our clean energy society… Like the smart phones omnipresent in our worlds today, tomorrow we will forget what life was like yesterday without our geothermal-heated homes, our smart cars, and our connected cities. As Dean Scarborough, the President of Avery-Dennison suggested at the Social Innovation Forum, this world is soon here. Why? Engineers love to solve problems; and they show up to work every day to solve the problems we give them. Thus, if leadership gives them the right climate resilient/energy efficient problems to solve, then we can achieve greater speed and scale toward our low carbon future. And if there are over 4 million engineers worldwide, then imagine what our companies-cities-countries can realistically realize in our new energy future by 2030. World Engineering Association We just need focus, finance, and stepwise strategy. Thus, reducing our global carbon footprint one-company; one- community at a time essentially boils down to- vision at the top, courage from management to change in the middle, and celebration of everyone’s contribution throughout to become green. This simple business wisdom combined with Richard Branson’s core entrepreneurial philosophy “Screw It, Just Do It“–the test, try, experiment, fail/succeed, repeat Silicon Valley philosophy of entrepreneurship has already begun to automate a virtuous cycle of innovation and investment in the low carbon direction that the world now needs to go.
In fact, the sheer numbers of committed individuals, families, communities, small organizations, large entities, business coalitions, city governments, groups of mayors… all inspired to do their part to advance local sustainable solutions in every corner around the world… seems unstoppable now. And even during the final week of negotiations, some colleagues close to the bilateral discussions commented to me that in the darkest, most difficult hours on Friday when the draft text was being red-lined by delegations; the Paris Climate Agreement was destined for a positive December 12th decision. Why? The tsunami of social innovations and new business ventures by entrepreneurs, city governments, and visionary local communities was simply too great and the future, simply too exciting…to be held back by a “Shall” or a “Should”; a “Common” or a Differentiated” responsibility.
TURNING TO FINANCE, OPTIMISM ABOUT A CLEAN ENERGY FUTURE
5. Turning to finance, optimism about a clean energy future will now be critical going forward into 2016 to actually inspire private investors, investment fund managers, and government sovereign funds to transfer and to transact the real amount of capital necessary to pivot toward a naturally intelligent carbon neutral world.
First, it is inspiring that interest in climate investment from the private sector is growing and that larger financial instruments like the Green Climate Fund are building capital commitments alongside the Global Environment Facility (GEF, already established at the Rio Summit in 1992). Imagine to date, GEF has already granted funds to 1000 climate mitigation projects (split 50/50 on renewable energy & energy efficiency) worth $4.2 billion USD. And, GEF’s seed financing has already also leveraged investment from partners, totaling $38.3 billion USD. Further, GEF continues to finance $3 billion USD in climate projects (2014-2018) and catalyze another nearly $25 billion USD more from their partners. GEF Inspiring is that GEF’s consistent investment in climate continues to effectively de-risk and attract future investments. Meanwhile, the young and ambitious Green Climate Fund aims to expand its investment portfolio from $168 million USD to $2.5 billion USD in 2016 to invest in “business unusual” projects from the nearly $10 billion USD capital fund it raised in less than half a year. Point being–larger funds are building, bundling, innovating, partnering, proliferating, and scaling at speed. That is inspiring.
Also inspiring on the climate finance front is the $100 billion USD per annum goal of “collectively mobilized capital” for climate action from the developed countries beginning in 2020. Yes, this $100 billion USD represents an international capital commitment from COP 15 in Copenhagen, but exciting now is that this collective capital is now referenced in the Paris Climate Agreement as the “floor of capital needed” to help build climate resilient economies in the developing world. Why? Again, 90% of the INDC country commitments in the developing world are contingent on climate finance…WRI So, not only do we as an international community need to scale commitments ASAP in the next 5 years to move from the projected 3.3C temperature increase to the minimal 2C threshold; but we need to well-finance these commitments for the low carbon economy transition. As well, 85% (133) of the INDCs include climate adaptation plans for communities to build greater resilience. WRIThus, $100 billion USD really only represents a floor of capital needed in the coming years to transition toward a low carbon future. Research in global economics (e.g. London School of Economics, Columbia University) and experiential knowledge from key development banks (my direct experience as the moderator for a Panel on Climate Adaptation and Finance at the COP 21) concur that we realistically need a minimum 438% more “collectively mobilized capital” for climate finance, considering both climate mitigation and climate adaptation. New Climate Economy So, the next most important question is: Where are we going to get that 438% greater capital commitment per annum for climate mitigation and adaptation?
THE GOOD NEWS IS THAT BRILLIANT MINDS IN NEW GLOBAL COMMISSIONS,
The good news is that brilliant minds in new global commissions, like the New Climate Economy, have figured out ways that national governments, local cities, businesses, civil society can effectively close the above funding gap by 59-96% by working together, while holding minimally to the 2C threshold by 2030.
Magic? No, the truth is: there is plenty of capital in the world. It’s just been imprisoned in funds and investments of our industrial past and spent with less consciousness and consideration for conservation and efficiency in our pioneering clean energy future. The truth is: now our time has come, and we are the people we’ve been waiting for. Social innovators everywhere are discovering more naturally intelligent energy-efficient and cost-effective ways to evolve our economies forward around every corner. Nick Stern and the Global Commission for the New Climate Economy– led by former Presidente Felipe Calderon of Mexico, estimate that we can save nearly $17 trillion USD and 3.7 GT of greenhouse gases by 2030 in our world’s cities by retrofitting and building them in smarter, more compact, and connected ways. New Climate Economy Report 2015 If we do the math, then that $17 trillion USD alone, buys us the nearly 40 years of climate financing we need to transition to a low carbon economy. As well, if I understand Jonathan Taylor (European Investment Bank) and Sean Kidney (the father of Green Climate Bonds) correctly, then that public financing could further unlock $23 trillion USD in institutional investment in climate finance – clean energy, resource efficiency, smart urban infrastructure, agriculture projects (Future of Green Bond Market Session, COP 21). The ripple has begun. And that’s truly inspiring, yes? Further, if we look to other large pools of future capital we can direct toward climate finance, then the funds saved by increasing efficiencies in the aviation and shipping industries and standardizing them appear equally exciting. Internationally, we could save $200 billion USD every year. New Climate Economy Report 2015 That’s nearly half of the $ 438 billion USD per annum estimated for the world to reach our healthy, low carbon diet goal by 2030. And there are other examples from other industry sectors.
Then, let’s turn toward the $600 billion USD funds that global governments have historically locked up in fossil fuel subsidies. The world’s sovereign wealth funds total assets are estimated at $7.2 trillion USD and 60% of those assets depend on energy exports (e.g. fossil fuels). WSJ The good news is that- oil prices have recently crashed. Sovereign funds are shrinking, so fund managers are starting to divest from fossil fuels to de-risk their investment portfolios and course correct uncertainty in the energy markets. How timely is that for now flipping those investments into new energy and efficient infrastructure projects as mentioned in the New Climate Economy? The very good news is that the unravel has already begun; and this sea change in capital flows we hope will already in 2016 catalyze significant resources toward renewable energy.
AS WELL, THE SOLAR ALLIANCE SHINED ITS NEW LIGHT AT COP 21
As well, The Solar Alliance shined its new light at COP 21 and continues to outshine other petroleum-based investments. Fortune As well, the business case to divest the $ 600 Billion USD world government subsidies for fossil fuels continues to strengthen also due to increased social and environmental health concerns of climate change and pollution. For example, China (historically relying on 80% coal-powered electricity) focused their INDC on phasing out coal toward 2030–an essential divestment and investment strategy to also avoid “Airapocalypse” in China and the world. Then, the wind and wave power industry in Europe especially has been capitalizing more than ever on our El Nino trade winds toward Southeast Asia. Meanwhile, innovation in the US on the algae biofuels and fusion fronts are coming into ever-sharper focus. NRELOn the continent of Africa, already 2 billion people are hungry for new, clean energy access while these 100’s million Chinese aim toward a Blue Sky future. Achim Steiner (Executive Director, UNEP) Globally, if we place just 2% of World GDP in renewables and efficiency not only will countries save $760 billion in fuel costs, but employment will go up 20% and energy demand will decrease by 40%. UNEP New Green EconomyAnd as countries, like Iran, have now successfully phased out subsidies for fossil fuels, the divestment-investment re-financing strategy forward becomes a reality. So those who think it’s impossible might start adapting their position…because the world is changing. “The time has come to be bold, brave and show solidarity in divesting from fossil fuels subsidies and investing in our renewable future now.” Hakima El Haite (Moroccan Minister of the Environment) Inspiring.
A DISCUSSION ON CLIMATE FINANCE WOULD NOT BE COMPLETE...
A discussion on climate finance would not be complete without reference to carbon markets and a price on carbon. Rachel Kyte (VP Sustainable Development, World Bank) reminded us at the World Climate Summit and throughout the COP 21 that carbon pricing is another good way to drive direct investment into low carbon ventures. Market forces could help also close the gap on the 438% more climate finance we need in the system over the next years. Shadow carbon markets and voluntary carbon markets are live and active in different parts of the world. Already, 40 national and 20 subnational regions have carbon-pricing systems. New Climate Economy Report 2015 And now, China has committed to developing a carbon market, as well. The problem is that the price of carbon is too low and these markets are not yet well coordinated. However, inspiring is that innovative market models to set floor prices on carbon and auction them up- are coming into focus. And, most inspiring- markets are starting to talk to one another and consider linkage (no, not leakage). The conversation between California’s carbon market on the West and Quebec’s carbon market on the East (per COP 21 Western Governor’s meeting at the US Pavilion) is a good example. So, the strategy forward on the carbon pricing and carbon market linkage front could be for the international investment community to assist in systematically linking markets; incentivizing them, and setting floor prices on different tons of carbon- such as black carbon from Chinese industrial plants and methane production on Argentinean ranches, then auctioning them up.
OF COURSE THEN, THE REAL LONG TERM QUESTION ON EVERYONE'S MIND IS...
Of course, then, the real, long-term question on everyone’s mind is: Will the pace of change- carbon markets or not, be fast and furious enough to avert greater impending climate change by 2030? The answer is: It has to be. We have no choice. Nature does not follow any country’s political agenda or any fund’s economic growth cycle. We must continue to think like visionaries on our “Road through Paris” forward and turn the climate finance puzzle upside down- sideways. We must explore every potential source of substantial finance to figure out how to spin faster that virtuous cycle of investment toward our new climate energy future. The great news here is that as sovereign funds shift capital toward clean tech and savings in efficiency from smarter cities unlock even more resource to invest in Green Climate Funds and the Carbon Market evolves as one International Marketplace with a robust price on carbon… then risk reduces. Enter other institutional investors to open the floodgates of the Green Climate Bond Market… then it’s game over. We win!
HOWEVER, FOR THIS GREEN BOND MARKET TO REALLY TAKE OFF...
However, for this Green Bond Market to really take off, Sean Kidney argues a few things really need to happen, and now. First, we need to communicate to the risk-adverse institutional investment community that the rule and tools of structuring Green Bonds are the same we’ve been using for 150 years…they are just now “Green”. Second, we need passion capital and impact investment from the techno-philanthropists like Bill Gates and the Warren Buffet Giving Pledge community to finance early stage projects in creative, smart, and sustainable ways that can be easily monitored and evaluated. Third, we need to create a track record of success that also builds trust in Green projects. Fourth, we need the development banks and those government sovereign and public funds to bundle projects into portfolios and secure them; so as to increase the credit rating of new green projects…until the projects and portfolios mature enough to stand on their own good credit.
Finally, we need to translate the INDCs- every country’s national plan into implementation and investment plans that stage and time their economic development and financial investments in ways that match the reality of their current socio-economic situation and growth trajectory in practical terms, matching viable pools of capital as necessary. And as the Vice President of the World Federation of Engineers, Darrel Dayluk, recommends, “We should soon have these investment and implementation plans staged out for the next 10-20-30 years.” Why? Only when financing is settled and off the table, can the long process of engineering new solutions begin. Wisest would be to focus immediate attention on producing as many gains as possible in energy and resource efficiency; while initiating planning for larger infrastructure projects. A realistic perspective of transformation in most industry sectors could take anywhere from 10-20 years. World Federation of Engineers
And of course, alongside the low hanging fruit of immediate energy efficiency should also be climate adaptation because in both cases, preventative medicine is best and most cost-effective. The problem with both efficiency and climate adaptation is that they are not as “sexy and exciting and potentially lucrative” as climate mitigation clean energy ad-ventures. Consequently, they have not until now attracted as much attention and capital as clean technology. Only 0.7% of government climate funds (representing on average only 0-12% of a country’s total public budget) have gone toward adaptation, but that value is changing. Global powers, like the US and China (e.g. the South-South Cooperation Fund) begin to ramp up their climate adaptation funding China Dialogues; while new tools like the UND-GAIN Index, a country-country tracker are coming online to help investors better assess the vulnerability and readiness of different countries to receive climate adaptation finance. Consequently, countries like Senegal begin to create a track record of successful climate adaptation project, which sets them up to receive even more capital. And thus, another virtuous cycle of investment flows also toward climate adaptation funds.
IN SUM, THE MAIN MESSAGE FROM THE INTERNATIONAL FINANCE COMMUNITY...
In sum, the main message from the international finance community is that the appetite and interest is strong to invest in the new climate economy. There is a universal sentiment that clean energy technology is already here to begin the transition, perhaps truly breakthrough technologies like algae biofuels and fusion are only a decade away…and we might be able to cycle them forward faster by speeding the virtuous cycle of capital investment. Political will is strong. Civic sub-national motivation to transform our world’s cities into innovations hubs for new energy technologies and regenerative centers to support a circular economy – is high. Empathy is greater now than before Pope Francis’ encyclical and a true accounting of the poverty-wealth gap as we enter a New Age of Grace. Significant focus was placed on Climate Adaptation and Financing in the Paris Climate Agreement to protect the most vulnerable, to protect the integrity of ecosystems, to ensure universal access to sustainable energy. Thus, a climate safe, cleaner, greener, more equitable future, free of abject poverty and energy access for all may be right around the corner… That’s Naturally Intelligent; that’s InSpiring.
Stay Tuned for Part III!