Innovate4Climate 2018

04/06/2018

Re-imagined from what used to be Carbon Expo – a joint World Bank/IETA event that ran for 13 years and focussed on the carbon markets – Innovate4Climate was launched in Barcelona in 2017 with the aim of covering climate finance more broadly.

As the event moved to Frankfurt this year, supported by the German government, big and broad it certainly was, with over 1,200 attendees from 74 countries, 282 speakers and 100 workshops and parallel sessions, leaving the event website claiming  “another remarkable success” as “the second edition of Innovate4Climate reaffirmed the event’s role in tackling climate change and accelerating climate-smart investment.”

There were many excellent initiatives presented.  The Kenyan government, for example, appears to be leading the way on NDC implementation and finance in Sub Saharan Africa, with its 2016 Climate Change Act now fostering a public/private Climate Change Fund.  Much of Kenya’s work has been bolstered by the UNDP’s NDC Support Programme, which takes the approach of embedding itself within national systems rather than seeking to direct them from outside.  UNDP’s work , in turn,is being supported by what appears to be a well-designed “Paris Climate Bond” concept from ClimateMundial.  This structure, which concentrates on refinancing projects approved under UN Climate’s Clean Development Mechanism, has two advantages over green bonds.  First, the underlying projects are unquestionably “green”, and second, they are directly linked to implementation of the Paris agreement, rather than some vaguer ‘clean energy transition’.

Equally, there were positive sessions and messages on carbon finance, with two reports released at the event from the World Bank and IETA that not only indicated some improvement in sentiment and pricing, but also clarity on the risks, especially if China’s long-awaited national market fails to take off.

Adaptation got a look-in

Given that the strong carbon-markets roots still evident in this newly rebranded event would lead to a focus on mitigation, adaptation still received some attention, with the EIB at one session noting that it was aware it was “lagging behind a bit on adaptation  and resilience finance.”  It was noticeable, though, that much of the private sector input on this topic still relies on just one group, the Global Adaptation and Resilience Investment Working Group or GARI, which released an Investor Guide at the Macron Summit in 2017.  Its admirably persistent and ubiquitous Chair, Jay Koh, noted how TCFD was helping push adaptation up the private sector agenda by forcing companies to look at physical risks (for example to their supply chains) and not just transition (‘stranded assets’) risks.

The ‘Marketplace’ area – with 44 exhibitors there and elsewhere in the venue, and a range of other organisations advertising their wares at a ‘Pitch Hub’ – was full of … people innovating.  Many of the ideas and businesses on view were technology based, including virtual reality and blockchain, around the latter of which two full sessions were organised. Innovations in financial products were also on display, for example, Althelia’s Sustainable Oceans Fund.

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Finally, much of the participant reaction during sessions also indicated encouragingly that the right questions are in the air.  Polled, for example, on what’s the main obstacle to translating NDCs in to actual projects, the audience at a summit session on this topic was split equally between lack of specificity in the NDCs and lack of capacity for project preparation, intensified by governments and financiers speaking “different languages.”  Similarly, when polled on how international funders like DFIs and philanthropies could help most, the resounding answer was through better co-ordination among themselves.

These are entirely correct analyses of the situation, indicating that the problems are now well recognised.  And it was good to hear from senior figures language becoming mainstream as to the ways can address these problems: the notion of “translating NDCs into concrete investment plans”, for example.

There was significant energy and goodwill, but still little sense of a clear overall direction or leadership

But did this event move us forward at all, let alone hit that accelerator as the organisers in their own words intended?  Apart from a few stalwarts like HSBC and Amundi, there were few representatives of private finance present, and my sense, from two days monitoring dozens of sessions and in side-meetings, was of significant energy and goodwill among participants, but still little sense of a clear overall direction or leadership.  Indeed, from many conversations, I sensed a good deal of frustration that individuals and institutions are still not sure of where they are situated – or are meant to be situated – in the Paris landscape.

Which is a bit odd, as these big climate events love an explorer for their keynotes.  Often it’s Bertrand Piccard, of ballooning and Solar Impulse fame, whose mantra is that every technological aspect of the Solar Impulse solar-powered flight project was deemed by experts to be impossible, so if you want to succeed, don’t rely on those old technologies, invent new ones.

In Frankfurt, it was Briton Tim Jarvis, who in 2013 recreated with period clothing and equipment Ernest Shackleton’s epic journey from Elephant Island to South Georgia in 1916 to rescue the crew of his doomed Antarctic expedition.

Jarvis used his and Shackleton’s journeys to make several highly valid points. To get an expedition off the ground, you need to align policy, people and finance. To make things work and get where you want to go on that expedition, you need to have an overall goal and put in place systems and processes and people that are fit to meet that goal. Along the way, you have to set incremental goals, but periodically step back and try to make sure you are still on direction. And people need to see tangible evidence of progress being made.

All great messages, but with one over-riding problem: climate/Paris finance doesn’t have an Ernest Shackleton at the helm.  For that reason, the truth is that we can’t, for example,  set finance goals, whether national or global,  because we don’t have a mechanism to turn NDCs into investment plans and then aggregate them into financeable portfolios. As to people, we don’t have a way of assigning roles to the various institutions that make up the Paris finance crew – the climate funds, DFIs and MDBs and organisations like the NDC Partnership – with the result that in many instances crew-members are competing rather than collaborating.  Nor are developing countries seeing any tangible evidence of progress on public climate finance, with the most important institution in this regard, the GCF, still failing to disburse more than a small fraction of the funding it has approved.

Yet the pinch-point for Paris finance seems pretty clear now – money for the primary projects, which can then be refinanced by the institutional capital markets in the form of green bonds or similar wholesale instruments.  The driver for that money – de-risking mechanisms from public money to bring in private money through blended finance – also seems pretty clear.  What’s still missing is political will to change the DFI and MDB agendas so this becomes their primary focus.

The climate action / climate finance caravanserai now moves on to the California Summit in September, which is looking as though it will be trying to pick up where the Macron Summit of December 2017 left off.

Plenty of summits, then, but still not much clarity in the view from the top?

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