Climate finance, yes! But where will the money go?

Hélène Connor, HELIO International

The climate negotiations are giving rise to several major funds to reduce emissions of greenhouses gases. Moreover, energy agencies are calling for projects to trigger much needed eco-development in less developed countries, as well as in industrial regions and cities. In this context, funders urgently need a tool to identify worthy investments and monitor their implementation. An NGO thinktank proposes the HELIO Index, specifically structured to provide such guidance.

Objective and specificity of the HELIO Index

There is, and will be, money to help countries fight climate change and adapt to new, unpredictable living conditions. These finances are precious and have to be allocated in the most profitable way, not only for the beneficiaries, but also for the countries and funders providing them. Therefore, funders demand that these monies contribute to the overall welfare of a country, not simply to reduce greenhouse gases or pollution. Hence, a new and encompassing tool is needed to assess the quality of the investment environment of a country and its actual needs to achieve eco-development.

Investors can no longer afford to fund failed technologies, have “white elephant” investments or succumb to bribery. For them, it is logical to have a proper tool to identify and select worthy "causes" and places where the money will be well-used and will eventually have a multiplier effect. In parallel, those countries wishing to be selected for investment will want to be seen to be in a good position and should "market" themselves appropriately, showing that they have a welcoming environment for such investments.

Both sides of the investment deal can use the HELIO Index for their own purpose.

Sound energy investments can only be made in countries where the total capital base (financial, produced, natural, human and social capital) is managed in a way that secures (at a minimum) its maintenance over time. In the capital approach, a country’s total capital base, its patrimony, is comprised of five individual assets:

  1. financial capital like stocks, bonds and currency deposits;
  2. produced capital like machinery, buildings, monuments, grids, telecommunications and other types of infrastructure;
  3. natural capital in the form of clean environment, natural resources, land and ecosystems providing services such as waste absorption;
  4. human capital in the form of an educated and healthy workforce; and
  5. social capital in the form of functioning social networks and institutions.

The various types of capital are interdependent and all are necessary to secure harmonious living conditions, i.e., eco-development. A good investment tool will therefore measure whether the financial, produced, natural, human and social capital stocks per capita are increasing or declining, and signal the overall implications for the country and its investment environment. Eco-development requires that all stocks keep improving; the Index helps monitor this progress.

This tool can also help identify the inevitable trade-offs that must be weighed as economies develop. For example, if the quality or the quantity of one capital stock – natural resources – declines, the HELIO Index, using the capital framework, will allow the user to assess whether this capital stock is being offset by growth in another stock, such as human capital.

Methodology and relevance

The HELIO Energy Investment Index measures the attractiveness of a country for investments, which is largely determined by its energy policy. Therefore the Index calls upon 24 main energy-related indicators and orders them into the five forms of capital which constitute a country's patrimony and, as such, are its assets for eco-development. These five classes of indicators are then weighted to derive the overall HELIO Energy Investment Index.

The HELIO Index is able to use readily accessible information. Through simple calculations, it will allow all stakeholders, e.g. investors, policy makers, and members of civil society, to monitor how effective national policies are, and to identify areas for successful investment in green energy projects in particular.

The HELIO Index is designed to help promote sound investments. It facilitates the objective selection of countries where investments will be better welcomed and projects are more profitable. As such, the HELIO Index directly contributes to climate stabilisation, to the promotion of eco-development and to initiatives like the UN “Sustainable Energy for All” (SE4ALL).