Financial institutions are crucial players in the global fight against climate change. In order for countries around the world to successfully pursue low-carbon and climate-resilient development, significant sums of finance will need to be harnessed.
The Paris Agreement – set to be finalized this week at the close of COP21 – will surely catalyze climate finance around the world. But climate finance will only represent a small percentage of overall global financial flows. Therefore, the extent to which climate change considerations are more broadly mainstreamed within financial institutions will have an important effect on the speed of the global economy’s transformation in response to climate change.
AIDA co-director Astrid Puentes Riaño was part of a panel that addressed this reality on December 7 during a COP21 side event titled Mainstreaming Climate Change Within Financial Institutions.
The event began with a presentation unveiling the Five Voluntary Principles that had been agreed to this year by 26 financial institutions on four continents, which collectively manage $11 trillion USD. These voluntary principles included commitments to manage climate risks, improve climate performance, account for climate action, adhere to climate change strategies, and promote climate smart objectives.
Following introductory remarks by the CEO of the French Development Agency and the Vice President of the World Bank Group, the main group of five panelists was invited to discuss their actions and views related to the initiative.
The importance of Puentes Riaño’s presence on the panel was immediately apparent – she was not only the only woman, but also the only voice representing civil society. Other panelists included representatives from major public and private financial institutions, such as the Development Bank of Latin America, the Vicepresident of the European Investment Bank and the head of the Ministry of the Environment and Tourism in Namibia.
The presentations on behalf of the financial institutions were brief, but to a certain extent heartening. Representatives lauded the billions of dollars they were committing to the fight against climate change, as well as other steps they were taking to reduce the climate impact of their investments. The European Investment Bank Representative, for example, highlighted their new emissions performance standard for investment in new energy development, which he said didn’t discriminate against any particular energy source, but effectively excluded coal.
There was also discussion about the importance of working together and building information-sharing platforms, such as a website to host information gathered by the financial institutions. The representative from the commercial banking sector said that his company had committed to investing $2 billion USD in green bonds, wouldn’t be funding any new coal plants, and would be increasing investments in renewable energy.
The Minister from Namibia stressed the devastating effect climate change is already having, and will continue to have, on his country. He explained that although climate change is a priority for his government, there is a lack of resources available to address the various needs that can arise at any time.
Speaking on behalf of civil society, Puentes Riaño welcomed the initiative as a good start, which projected a positive image of the financial sector. Recognizing that the effort was still in its nascent stages, she offered some recommendations regarding its implementation.
First, she called for consideration of human rights and social risk to be included in project assessments. This, Puentes Riaño explained, would facilitate the selection of the right kinds of projects to invest in. Secondly, she called for an effort to ensure that there was consideration of, and agreement among financial institutions about key definitions, for example “renewable energy” and “sustainable development”, as well as thought given to which options should be excluded as false solutions. Finally, she called on these funding institutions to focus on how this initiative would be implemented. She recommended having a clear, transparent, and participatory road map that was ambitious enough to put the world on a 1.5 degrees C path.
During discussions like these, it’s easy to see how important it is for civil society organizations to be present and doing their best to contribute to the dialogue. In this case, AIDA was able to join the conversation and use our position at the table to help increase awareness about and advocate for access to information, transparency and accountability, public participation, and human rights.