Want green growth? Ease access to financing, say experts

As sort-of-mind games continues between governments and green investment international financiers-on how and when to avail green financing. Yesterday, the financing issue came into focus at the closure of the Global Green Growth Summit, at Jeju Island, South Korea.
Fonerwa's Alex Mulisa (C) stresses a point during one of the sessions at the forum in Korea earlier this week. / Courtesy
Fonerwa's Alex Mulisa (C) stresses a point during one of the sessions at the forum in Korea earlier this week. / Courtesy

As sort-of-mind games continues between governments and green investment international financiers—on how and when to avail green financing.

Yesterday, the financing issue came into focus at the closure of the Global Green Growth Summit, at Jeju Island, South Korea.

Climate experts say scaling up the renewable energy and other green growth efforts to address climate challenges will remain a “fanciful concept” unless the financing process eases.

At the summit, environmentalists and other players failed to find common a ground on the best ways to simplify the rather rigorous mechanisms to finance green projects.

Environmentalists say there is a big mismatch between the green investments and expectations from public sector financiers, and this has made the application process to green investment fund “too inflexible.”

Alex Mulisa, the coordinator of Rwanda’s Fund for the Environment and Climate Change (FONERWA), says the frustrations associated with access to funding have compelled some countries to devise their own means which may not necessarily be the solution.

“Climate finance is a collective responsibility for all involved stakeholders and, “so when the countries become frustrated and go at it alone, it is not becoming effective as it was initially projected,” he said.

Some of the international funding organisations include Green Climate Fund (CGF), Adaptation Fund, Global Environment Facility and financial institutions such as the African Development Bank (AfDB).

But the institutions were repeatedly cited as those with “rather rigorous procedures” of applying for green financing.

To address the issue, Mulisa said some countries, such as Rwanda and Costa Rica, decided to devise country initiatives as the easiest way to have things done, with hope that international green growth partners will find them on the way.

“Some countries such as Costa Rica and Rwanda have taken on the national mechanisms—that confidence where we have decided to move on our own (fund own projects) and meet along the way with the international partnerships that we seek. But if we continue to look up to international institutions to trigger, motivate and move along, it takes a very long time,” he said.

Mulisa urged green funds, international partners and private green financiers to “agree to fail before you succeed--that’s when green domestic initiatives can make a difference.”

Risks involved?

Carlos Lopes, the UN Under-Secretary General and Executive Secretary of Economic Commission for Africa, acknowledged the challenges.

He explained that the complexity in financing green economy come from that fact that lots of risks involved, especially from the private sector come from negative interest rates and a number of microeconomic .

According to Lopes, everybody in the financing world is very particular and there is a need for cost benefit analogy.

“Normally, if you say that there is so much frustration and complexity associated with the current green financing instruments it is very prominent. It is high time for us to look into the reasons why there is such complexity; is it a way of actually hiding the notion of risk?”

“It is a way of dealing with declination, which will affect other areas. There are a number of very invalid implications including the fact that we are dealing with environment today where there is very little appetite for risk,” Lopes explains. 

He noted there is a need to pose the question on whether this is not just an effect of a bigger problem.

“If you look at the opportunities that are offered by the green economy and green investments, you would have expected people to jump into it. But because of the notions of risk associated with the way we calculate, you don’t see any interest or appetite for that kind of investment.”

Kurt Lonsway, the manager of environment and climate change at the African Development Bank (AfDB), says before anyone puts the money out, they need to have all the checks and balances right and make sure that the money shall be put to good use before it is disbursed.

“This is not out of the ordinary; other than the private sector; institutions like us (AfDB) with very rigorous controls have to meet the requirements. And, often times, even ourselves are now aware of all those processes and procedure of those requirements we need to meet the appraisals. We have to have all checks and balances in place, to make sure we don’t miss anything. And, unfortunately, this takes longer than expected.”

Green financing

Dr Susilo Bambang Yudhoyono, the president of Global Green Growth Institute (GGGI) Council, during his closing remarks on Friday morning said that, renewable energy or any other solutions will just remain fanciful concepts unless “we can find a way to finance them.”

He noted that , green financing is at the heart of green growth, growth that reduces poverty and social inequality, and that has a minimal impact on the environment. 

The former President of Indonesia added that there is still a long way to go to keep climate change below 2 degrees centigrade, noting that funding this “fundamental change of direction from dirty to clean development path is central to Green Finance.”

The World Economic Forum estimates that in order to meet the needs of a growing world population, $6.9 trillion of investment will be required. In addition to this, a further $ 3.2 trillion will be required to green those investments, in order to keep within a maximum 2 degrees Celsius temperature rise.

However, there is plenty of financing opportunities that can be harnessed across the world, in addition to the increasing space for the private sector. 

For example, Yudhoyono says, of the $ 331 billion of estimated climate finance flows in 2013, $193 billion originated from private financiers.

editorial@newtimes.co.rw

 

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