Impact investments are investments made into companies, organizations, and funds with the intention to generate social and environmental impact alongside a financial return, (Global Impact Investing Network (GIIN), 2018).
GIIN’s 2018 Annual Impact Investor Survey of 229 impact investors with assets under management of $228 billion show found that 1) the market is diverse; 2) the impact investing industry is growing; 3) impact investors demonstrate a strong commitment to measuring and managing impact; 4) overwhelmingly, impact investors report performance in line with both financial and impact expectations; 5) impact investors acknowledge remaining challenges that need to be addressed within the industry.
Good news for the food and agriculture sector, which was the most popular sector among impact investors with 57% of respondents collectively allocating 6 percent of their assets to the sector. And, a compound annual growth rate of 13% over five years resulted for 82 survey respondents tracked since 2013 with strong growth in sectors including the the food and agriculture sector.
At the UNFCCC level, countries undertake Technology Needs Assessments (TNAs) to determine their climate technology priorities. According to the UNFCCC, a TNA supports national sustainable development, builds national capacity and facilitates the implementation of prioritized climate technologies. A recent report published by the UN Environment Programme and Technical University of Denmark (DTU) summarized the climate technology needs, priorities and barriers from 21 country TNAs and Technology Action Plans (TAPs). Despite technology improvements and price decreases, common barriers to technology adoption are high costs of implementation and operation and maintenance, difficulties in accessing finance, and uncertain economic viability.
In terms of agriculture, support for access to climate information services can make a real difference in the lives of farmers in the developing world, especially women. According to an info note published in collaboration with CCAFS, one of the aims of the research project, Agro-Climate Information Services for Women and Ethnic Minority farmers in South-East Asia (ACIS) by World Agroforestry Centre (ICRAF) and CARE International in Vietnam, Cambodia and Lao PDR, is to contribute to coinvestments in improved agro-climate information systems.
A new report, Exploring Metrics to Measure the Climate Progress of Banks, by the World Resources Institute, the UNEP Finance Initiative and the 2 Degrees Investing Initiative explores the transparency around climate finance investments.
For example, are banks accounting for “green” investments more than “brown” investments (those that contribute to GHG emissions)? More clearly defining what constitutes green vs. brown exposure metrics would help to improve the understanding the financial sector’s climate progress.
The analysis of 35 large development and commercial banks found that for the most part, banks are unable to convey their overall climate finance progress. It is an interesting read and the report can be found here.
The authors quantified the damages associated with the United Nations targets of 1.5 °C and 2 °C temperature increases as well as the current national mitigation commitments (almost 3°C) in part by combining historical evidence with national-level climate and socioeconomic projections. The authors state that “achieving the 1.5 °C target is likely to reduce aggregate damages and lessen global inequality, and that failing to meet the 2 °C target is likely to increase economic damages substantially.”
According to an article about the research in The Guardian, other researchers applaud the work, acknowledge the difficulty in translating the impacts of climate change into economic damages, mention the importance of outlining assumptions made in the research which the authors did, and highlight that a high priority for future work should be pinning down just how large the effects of climate will be on the long-term growth of GDP. So, it’s a good start, there’s more work to be done, and it remains clear that continued work towards achieving aggressive climate change mitigation targets will make a difference!
Although the primary focus on global climate finance has been on the financial commitments of developed countries to developing countries through the Paris Climate Agreement via the Green Climate Fund, developed countries recognize that they need investment to meet their climate goals too. Today, the UK’s environmental audit committee (EAC) said that if the current trend of decreasing investment in the country’s low-carbon economy continues, it would be unable to meet its pledges on carbon emissions reductions. These decreases have included a more than a 50% decrease in funds going into renewable energy in 2017, following a 10% decrease in 2016.
It has been suggested that there is a disconnect between government policies and its sustainable growth plans with some suggesting that moving forward the Bank of England’s work as well as the performance of other government departments should be linked to climate change. However, the Department of Business, Energy and Industrial Strategy indicates it is committed to meeting climate change targets and will have invested £2.5bn in low-carbon innovations by 2021. More details can be found in The Guardian’s article, UK must secure billions in investment to meet climate targets, MPs warn.
Another event taking place today in Seattle, Washington, United States is the Bloomberg Sustainable Business Summit, where leaders in business and finance will discuss sustainability as good business and investment. I was particularly happy to see that topics such as considering gender when making investment decisions and leveraging disruptive technology to further climate goals are on the agenda.
I attended the Global Hunger Today: Challenges and Solutions conference at the Centre for Global Development, University College Cork (UCC) along with two of my MSc CCAFS colleagues today. There was an inspiring group of presenters and attendees committed to improving nutrition and food security. We heard about several projects funded by Irish Aid, including a Self Help Africa project in Zambia and a Concern Worldwide project that included Climate Smart Agriculture (CSA) practices to build resilience in Chad.
In terms of funding, my takeaways were that financing for nutrition-sensitive interventions is increasing; there is potential of mobile technology for cash transfers in Sub-Saharan Africa; there is a great appreciation from NGOs for flexible funding from donors; there is a need for greater investment in data and evidence generation to measure the impact of Sustainable Development Goals (SDGs); and it is important to differentiate the support required for famine vs. hunger which are disaster relief and development, respectively.
CCAFS’ Alberto Millan, who is working on finance innovation for the organization, participated on a panel yesterday evening in Bonn. The panel entitled, Agriculture is on the COP menu…so what now for climate finance?, was a side event at the SBSTA’s meetings co-hosted by FAO, IFAD, WFP and the panelists in addition to CCAFS represented two governments (Kenya and Mongolia), a civil society organization (Action Aid) and two funders (GCF and GEF).
The panel covered how to use climate finance to drive action across the global agricultural community and support smallholders in adopting sustainable and resilient farming systems. It was an extremely informative session and you can learn more about CCAFS’ research and work on finance innovation by viewing the event video here.
As I was conducting research for my literature review, I learned that climate finance accounting is a challenge. There is an absence of consistent accounting rules to assess progress of financial flows towards the goals outlined in the Paris Agreement. This has been recognized by the UNFCCC, who has been working on developing a common approach for climate finance accounting. Governments are to agree on new rules to govern climate finance accounting at the 24th Conference of Parties (COP24) in Katowice, Poland this year.
The Bonn Climate Change Conference is starting tomorrow, April 30, and runs through May 10. I am delighted to see events to scale up climate finance for mitigation and adaptation on the May 7 and 8 agenda!
According to the UN Climate Change website, the in-session workshops will involve technical and action-oriented discussions about lessons learned from three areas: 1) Articulating and translating needs identified in country-driven processes into projects and programmes; 2) Roles of policies and enabling environments for mitigation and adaptation finance; and 3) Facilitating enhanced access.
The aim is to generate concrete findings and conclusions to be considered by the COP. I look forward to seeing the results!