Climate Finance for a Green Economy

By Monica Graaff

There are an increasing number of global climate funds available to invest in climate change mitigation projects and kick-start a green economy, but accessing these funds is not as simple as it might seem, according to speakers at a Cambridge Resilience Forum event in Cape Town this week.
 
The funds range from the $30 billion committed to climate friendly development at the United Nation’s Framework Convention on Climate Change (UNFCCC) Copenhagen conference last year to private equity funds. But, according to Smita Nakhooda of the World Resources Institute based in Washington DC, many tensions exist as to how these funds should be sourced, committed and managed.
 
“At the heart of the debate is how to maintain high standards of financing, while ensuring that funding institutions are nimble enough to ensure that things get done,” she said. “And how do you ensure that the finance reaches the kind of projects that will have traction and bring about major change?”
 
Nakhooda said one of the major tensions was that developing nations wanted to have direct access to funding and many donors felt safest working through the tested international bodies such as the World Bank and the Global Environment Facility (GEF). Advances in meeting this challenge of ‘top-down versus bottom-up’ had been made with the introduction of the Adaptation Fund and the growth of national low carbon development funds, but it was too early to judge how these would fare.
 
Richard Sherman of One World Sustainable Investments and a member of the South African delegation to the UNFCCC said that the Copenhagen Accord included an agreement to set up a new fund that was currently being negotiated. Debated issues were over global technology intellectual property rights, insurance mechanisms, whether to make grants or loans, and what the sources of funding should be.
 
A possible source for this new fund could be using 1% of GDP from developed countries, but then the question would be how the UN Secretary General would decide to mobilize these funds, he said.
 
Funds could also possibly be sourced from the private sector via climate transactions taxation, leveraging emissions of the transport industry, and implementing George Soros’s proposal of an IMF rights issue.
 
However, the good news, he said, was that the $30 billion committed at Copenhagen would flow through existing channels, and would therefore not be hampered by this process of negotiation.
 
The important thing for South Africa to remember was that it needed to ensure that it had established the right channels to receive these funds so that it would be ready to receive them, he said. Work still had to be done in this area.
 
Carl Wesselink of the South African Export Development Fund called for a pragmatic approach to accessing climate-related funds and putting them to good social and economic use. The point was not to focus on becoming ‘carbon neutral’ (which usually had “zero social impact” and had a “negative impact on the country’s Balance of Payments”) but rather to focus on “how we get energy and how we use it”.
 
“Our decisions need to be practical and socially responsible,” he said.
 
Best known for the role he played in implementing South Africa’s acclaimed flagship Clean Development Mechanism (CDM) housing retrofit project at Kuyasa in Khayelitsha, Cape Town, he said it would cost R1500 per unit over five years to retrofit an RDP house with a ceiling and a solar water geyser.
 
“This might not sound like a lot to us, but we need to understand the social and economic benefits from these simple interventions for the people who live in RDP houses. It means the inhabitants regain about 10% of their income in energy saving, get access to hot water for the first time, and avoid having to endure about 3 litres of condensation a night dampening their beds and affecting their health,” he said.
 
While the CDM was a useful mechanism, it was laden with bureaucratic processes that used up about 75% of the funds available, he said. Accessing funds from local funding institutions, such as the National Sustainable Settlements Facility, should not be ruled out as an interim measure to get things going.
 
Graham Sinclair, principal at Sinclair & Company, a boutique investment advisory firm specializing in sustainable investment in emerging markets, said private investment offered a possible source of climate finance.
 
“Investors are geared up to make investment decisions along ESG (Environment, Social, Governance) principles if people insist on them. The more investors ask for this kind of investment, the more the market will work in this direction,” he said.
 
But the bottom line for private funding, all agreed, was that the market required a reasonable degree of certainty that investment will be profitable.
 
As Nakhooda pointed out in her opening remarks, it is cheaper to mitigate the effects of climate change through climate friendly investments than to deal with post-event adaptation. Mitigation offers an opportunity for profiting from the development of a green economy. Adaptation is more likely to be expensive damage control.
 
Dirk Visser of the Cambridge Programme for Sustainability Leadership, who chaired the session, noted that, according to the World Bank, $50 billion was needed annually for Africa to cope with climate change. According to some, this figure is severely underestimated.
 
Monica Graaff is a freelance journalist who works on projects with the University of Cambridge’s Programme for Sustainability Leadership.

The Risks from Sea Level Rise – assessments from Australia & Cape Town

Reuters reported today on an Australian parliamentary committee’s finding that $137bn worth of property in this island continent was at risk from rising sea levels and more frequent storms. 80 percent of Australia’s 21 million people live on the coast and authorities are split on whether to adopt a policy of retreat or defence against rising seas.

The social and economic impact of sea level rise was the topic at our recent Cambridge Resilience Forum session (get the podcast here). A 2008 risk assessment done for the City of Cape Town concluded that within the next 25 years there is an 85% probability of 60,9km2 (2% of the Metro area) being covered by sea for a short period, with an accompanying expected loss of real estate value estimated at just under R20bn. As Prof Geoff Brundrit explained, these estimates are predicated on only a 15 centimeters rise in the sea level. Even such a relatively small rise changes the frequency and intensity of extreme storm events and this causes the damage. A more dramatic sea level rise, when the polar ice caps melt for example, causing coastal areas to be underwater permanently, is not even included in current estimates for the next 30-50 years.

Gregg Oelofse of the City of Cape Town elucidated some of the challenges for government. The possible mitigation strategy of building more storm walls and barriers can actually increase the impact of storm events. The Cape Town study done in 2008 was one of the first in the world and has placed the City on the forefront of planning and thinking about these issues.

Similar to the Australian report, the Forum session also highlighted the importance and complexity of legal liability and insurance cover related to climate change and sea level rise. At the Cape Town event Herman de Meyer, underwriting specialist of Santam, emphasised that insurers need to collaborate with scientists and policy makers to better understand these risks.

The 16 October edition of Engineering News carried an article on the sea level rise Forum session. Read the online article here…

Forum online booking launched

We are very excited to announce that the online booking system for the Cambridge Resilience Forum has now been launched at www.cpsl.co.za/forum/register/ People can now register as members, book for events and pay online.

The very secure online payment system caters for Visa and Mastercard credit cards, but there is also the option to pay via Electronic Fund Transfer (EFT).

We trust that this new system will contribute to the Forum’s objective of offering convenient, flexible  and cost effective opportunities for continuing professional development.

The launch of the online booking system comes as we announce the double treat in November with two exciting sessions each in Cape Town and Johannesburg.

Podcast: Forum sea level rise

A recording of the Cambridge Resilience Forum event on Sea Level Rise held on 30 September 2009 in Cape Town. The format of the event was a panel discussion, moderated by Peter Willis of CPSL. The panelists were:

• Prof. Geoff Brundrit – Special Advisor on Oceans and Climate Change for the National Department of Environmental Affairs
• Gregg Oelofse – Environmental Resource Management, City of Cape Town
• Anton Cartwright – Economist, Econologic
• Herman de Meyer – Underwriting specialist, Santam

To download the podcast click here… or click ‘play ‘below to listen.

The R20bn risk – discussion on impacts of Sea Level Rise

As part of the Cambridge Resilience Forum, we present a Forum Discussion on:

The Financial and Human Impact of Sea Level Rise
Wednesday 30 September 2009
17:30 – 19:30
Townhouse Hotel, 60 Corporation Street, Cape Town

Some climate scientists believe that we may have underestimated the tempo of sea level rise. Sea level rise could have a severe human and financial impact on low-lying coastal areas. What is the latest scientific evidence indicating? How will sea level rise impact property investment and insurance? How are we going to deal with disaster impact and the mass resettlement of people?

These are just some of the questions that will be discussed by our expert panel consisting of:

• Prof Geoff Brundrit – Special Advisor on Oceans and Climate Change, National Department of Environmental Affairs
• Anton Cartwright - Economist, Stockholm Environmental Institute
• Rian Mouton – Santam Facultative Reinsurance
• Gregg Oelofse – Environmental Resource Management, City of Cape Town

A 2008 sea-level rise risk assessment done on behalf of the City of Cape Town concluded that within the next 25 years there is a 85% probability of 60,9km2 (2% of Metro area) being covered by sea for a short period. The accompanying expected loss of real estate value is just under R20bn.

The report concludes:
“The sovereign risk of sea-level rise for the City of Cape Town is significant and will increase in the next 25 years regardless of reductions in greenhouse gas”.

This importance of gaining understanding on sea level rise therefore cannot be over emphasized. Come and join us to learn, with other professionals, about this topic.

Non Forum members pay R230 to attend, but why not join the Forum and get great discount on a year’s seminars?

For more information and to book your seat, please contact Magda de Kok on magda.dekok@cpsl.cam.ac.uk

Toddlers with matchboxes

By Monica Graaff

Ever since we discovered how to use fire, we humans have been like “toddlers with matchboxes” – and dangerously so.

So said science writer and lecturer Janine Benyus, author of Biomimicry: innovation inspired by nature (first published in 1997). She was talking at the inaugural lecture of the Cambridge Programme for Sustainability Leadership’s Resilience Forum in Cape Town on 27 August 2009.

Her fondly delivered description of our “relatively new species” conjures up a vivid image of how we humans have become too smart and successful for our own good. So smart and populous in fact, that our beloved “heat, beat and treat” approach to almost everything could threaten our very own survival.

The problem with our approach to solving problems is that it usually causes a host of other problems in its wake – problems that in turn need solving. Human induced climate change is an obvious example.

Read more

Biomimicry in engineering and building

Green buildings has a positive impact on a number of impacts besides water and electricity savings, says PD Naidoo & Associates Consulting Engineers in a recent Engineering News article.

“Green building is a broad name for efficiency across everything, not only buildings, and includes transport, structures, rail networks and waste disposal.”

This follows on statements in the same publication and in other reports that green buildings also improve the investment case for owners.

PD Naidoo & Associates continue that an increased understanding of the link between a building and its natural environment and the influences these have on each other has also led to new design approaches in construction.

The concept of biomimicry has increased in prevalence, they explain. Biomimicry involves the use of nature as inspiration for design concepts. Conventional examples of this are termite mounds, which run as efficient large-scale city-type habitations, and the invention of Velcro arising from observations of burrs on animal fur.

In the recent Brunel Lecture, Peter Head, director of ARUP, also referred to the 10 principles of Biomimicry as providing the solutions for sustainable design.

To learn a lot more about biomimicry, we invite you to attend one of the public lectures by Janine Benyus and some of the directors of the Biomimicry Institute. Get all the info here…

Janine Benyus recently spoke alongside former US president Bill Clinton and renowned business author Peter Senge at the American College & University Presidents’ Climate Commitment Summit in Chicago.