Innovating business and investment for climate-resilient sustainable development

Amath Pathe Sene, World Centre for Sustainable Development

2015 has been a busy time for the international negotiations on the future of our planet. Just two months after the adoption of the bold and ambitious Sustainable Development Goals (SDGs) last September, in New York, 147 world leaders have gathered again in Paris to negotiate a pact to keep global warming below 2°C above pre-industrial levels. In the ‘city of lights’, under state of emergency after the terrorist attacks, the COP21 gives a unique opportunity for our generation to reflect the future we want: peaceful and inclusive societies that are resilient to climate change.

Achieving that future requires a shift for all countries towards a low carbon development trajectory, as outlined in SDG 13 on climate change, and its related targets. This means a radical change in the way we live, the way we produce, the way we structure our economies, the way we finance them.

Over the last decades, rapid business development, genuine innovation and massive investments have played an important role in wealth creation and helped humanity achieve tremendous development gains. At the same time, they have contributed to numerous negative externalities, such as more frequent natural disasters, drought, storms, wildfire, sea level rise, which in turn also pose serious threats to businesses performance and growth sustainability. This gives businesses an opportunity to play a key role in addressing climate change.

Developing countries remain the most vulnerable to climate change, a burden they consider a historic responsibility of developed countries. Business opportunities and growth potential in many countries in the Global South are imperiled by climate variability and change. Climate risks are now a serious hurdle for investors when $100 billion per year investment is needed by developing countries to tackle climate change. Moreover, the investment gap to achieve sustainable development is estimated at $2.5 trillion annually by 2020 and the Addis Ababa Action Agenda has set ambitious transformational goals for sutainable development financing. Financial mechanisms such as the Green Climate Fund, SDGs Fund, Corporate Social Responsibilities initiatives, among others, should work together to accelerate the implementation of the 2030 agenda.

The good news is there is no shortage of money across the world. More often, there is a lack of de-risked bankable projects. To date, the global financial system manages almost $140 trillion of financial assets through banking, $100 trillion via pension funds, $100 trillion on capital markets including bonds and more than $73 trillion in equity. Some of this money already supports a growing number of real-time initiatives guided by innovative policies seeking to align the financial and capital markets with sustainable development and climate change action. For example:

  • The Johannesburg Stock Exchange (JSE) and Brazil’s BOVESPA stock exchange require sustainability disclosures;
  • The Bank of England’s prudential review of climate risks to the UK´s insurance sector is based on a connection between its core prudential duties and the UK climate change Act; and
  • Regulators such as Standard & Poor´s ratings services identified climate change as a key mega trend effecting sovereign bonds.

So far, and with only one more official day to go before the end of COP 21, only $200 million has been announced by some developed countries (USA, UK, Canada and Japan) to support the Least Developed Countries Fund (LDCF) on climate adaptation and more than $10 billion in promised funding for the Green Climate Fund.  Much more is needed to reach the 100 billion required.

The time has now come for governments, international organisations like the United Nations, and civil society to engage with the private sector to raise the money required from taxpayers in the richest countries, and from private investors and financial system, to tackle climate change. Governments can signal its willingness to engage by acting on key drivers of business, such as government policies – climate change policy (incentives, regulations, investments and funding, risks), consumer demand (for green products, services and companies) and affordable technology innovation transfer (products, innovation), especially on wind, solar, waste management and transport.

Strong, simple and coherent mechanisms from the Paris pact to prevent corruption, ensure transparency, and make funds, including innovative finance, work quickly and better to impact on most vulnerable people, in particular women and youth in developing countries, are needed.  

Investing in the wellbeing of our planet and halting climate change should not be seen as a ‘cost’, but as a worthwhile economic investment for future generations. Business worldwide must act now as shareholders, not only as donors, and this COP 21 must ‘seal the deal’ for people and planet!