Incentives, models and tools - PowerPoint Presentation

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Incentives, models and tools

Leveraging Innovative Finance for the SDGs

5 MARCH 2019

SESSION IX

FINANCING THE SDGs

FRAMEWORK

Working With The Private Sector on Climate ChangePresented by Erik Davies

March 2019

We have come a long way…

Pre 2002

Lack of trust internationally

Yet many partnerships with business at local level achieved development goals

The World Summit on Sustainable Development (2002)

Business officially recognized as development actors

Today 2019

Mobilizing significant private investment to address climate change

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Projects

Traditionally governments and donors have tapped into big business through their CSR programs for project financing. CSR programs represent a tiny part of what business can contribute

Enabling sustainable business models will mobilize significant investment from business – since this talks to their bottom line.. Moving from CSR To Sustainable Markets

Sustainable Markets

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Risk

Markets

OpportunitiesHow Does Business View Climate Change

New markets with new players:Wind, solar, battery storage

Zero emission vehiclesAutonomous aquatic robots for collecting ocean plasticsProduct differentiation:Blockchain & Supply chain finance (Traceability & Transparency)

Consumers are demanding sustainable products

Driven by improved: access to information on how products are made (internet)Education regarding impacts of productionGlobal Brands are starting to drive GHG reductions across their supply chainsExtreme weather and associated disease outbreaks disrupt business and destroys capital investments (Thailand’s floods 2011)Stranded assets in oil, coal and natural gas (Investor Risk, lost jobs, lost business)GHG emissions and air pollution can result in regulatory fines, and bad press

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Business can respond to climate change at 3 levels:

Corporate: focuses on all aspects of operationsSupply Chain: working with suppliers to manage their impactsSectoral: working with broad set of stakeholders to drive change

Business Response

Corporate

Supply Chain

Sectoral

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The Business Response (cont)

Many businesses are changing in their operations and driving reform in their supply chains. The degree to which this is happening depends upon:

Business incentive: - how climate impacts profitsCapacity, resources and skills available to respondExternal Support to navigate change

In this respect there have been some interesting innovations to how businesses are response to the climate challenge.

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Green Freight Asia

Clean Cargo Working GroupRenewable Energy Buyers Alliance

BSR develops collaborative initiatives among multinationals trying to address climate change. A few examples include:

Collaborative InitiativesShippers and carriers in Asia committed to reducing GHG emissions (IKEA, DHL, Heineken, etc.)

Creating markets for renewable energy (63% of Fortune 100 companies have targets to reduce GHG emission or buy renewables)

Represents 85% of global freight carrying capacity. Its members are committed to reducing environmental impacts and GHG

Collaborative Initiatives & Government

While the resources of large companies are considerable, collaborative initiatives have also taught us that government support is crucial.Many have benefited from donor support at start-up

Collaborations have helped identify opportunities where government interventions are required to create more sustainable markets.REBA identifies regulatory barriers and other challenges to procure renewable energy. GFA needs help reaching SMEs and creating financial incentives for fleet upgrades

Once these “barriers” are removed, the benefit of government support is the creation of a sustainable market driven by long term private sector investment

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How Governments Can Support Sustainable Business

Governments successful in creating vibrant business environments do so by providing:Clear streamlined policies and regulatory frameworks that align the work of ministries and send a clear, consistent signals to business.Tax incentives and disincentives on products etc.

Subsidies for green businesses and removing perverse subsidies Educate and raise awareness SMEs on climate change issuesDevelop enabling infrastructure (smart grids, charge stations,

etc) for new businessWork with banks to provide accessible financing that reduces riskEliminate corruption and increasing transparencyThese measures have consistently been shown to encourage business investment by creating safe, sustainable markets

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Create start-ups that contribute to climate resilience in your country

Support collaborative initiatives by addressing barriers identified that free up market investmentsChallenging times require innovation. Don’t be afraid to try something new!

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12Public Private Partnerships

Cross Hiring From Business

Consultative Groups

Developing Incubators For New BusinessInvent something new!

Collaborative InitiativesHow Governments Can Partner With Business Design, Build, Operate, DecommissionTraditionally for infrastructure projects but are being adoptedInvestigate challenges facing businesses by forming working groups with industryHire people from the private sector to increase your capacity and understanding of business issues

The Bottom Line

Successfully engaging business requires:

Speak their bottom line

Developing clear policies, regulations and incentives to support the development of sustainable markets

Proactively engaging business in multiple ways to develop trust, understanding, and drive innovation.

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Parallel Sessions

Climate Smart Investments – Alpha Room – GREENThe Business of Climate Change –

Beta 1 Room – PINKScaling-Up Climate Finance Readiness through Public-Private Partnerships – Beta 2 room- BLUE

Social Impact Investing – Delta Room – MINTGreen Finance – Epsilon Room – ORANGE

Risk Financing – Gamma Room - YELLOW