Focus on OPIC and Ex-Im Bank's Use of Financial Instruments...
WRI’s “Climate Finance” series tackles a broad range of issues relevant to public contributors, intermediaries, and recipients of climate finance—that is, financial flows to developing countries to mitigate greenhouse gas emissions and adapt to climate change impacts. A subset of this series,...
Five-country comparison on solar photovoltaic and on-shore wind energy policies and progress.
This article first appeared in Project Syndicate
Water is never far from the news these days. This summer, northern India experienced one of its heaviest monsoon seasons in 80 years, leaving more than 800 people dead and forcing another 100,000 from their homes. Meanwhile, Central Europe faced its worst flooding in decades after heavy rains swelled major rivers like the Elbe and the Danube. In the United States, nearly half the country continues to suffer from drought, while heavy rainfall has broken records in the Northeast, devastated crops in the South, and now is inundating Colorado.
Businesses are starting to wake up to the mounting risks that water – whether in overabundance or scarcity – can pose to their operations and bottom line. At the World Economic Forum in Davos this year, experts named water risk as one of the top four risks facing business in the twenty-first century. Similarly, 53% of companies surveyed by the Carbon Disclosure Project reported that water risks are already taking a toll, owing to property damage, higher prices, poor water quality, business interruptions, and supply-chain disruptions.
The costs are mounting. Deutsche Bank Securities estimates that the recent US drought, which affected nearly two-thirds of the country’s lower 48 states, will reduce GDP growth by approximately one percentage point. Climate change, population growth, and other factors are driving up the risks. Twenty percent of global GDP already is produced in water-scarce areas. According to the International Food Policy Research Institute (IFPRI), in the absence of more sustainable water management, the share could rise to 45% by 2050, placing a significant portion of global economic output at risk.
When President Barack Obama announced the country’s first national climate strategy, many people wondered what it would mean across the nation. Yet, the strategy may carry even more significant implications overseas.
The plan restricts U.S. government funding for most international coal projects. This policy could significantly affect energy producers and public and private investors around the globe.
On July 16, 2013 the World Bank agreed to support universal access to reliable modern energy and limit the financing of coal-fired power plants to rare circumstances in an effort to address climate change concerns.
Sustainably-focused small and medium enterprises (SMEs) manufacture and market environmentally friendly products and serve low-income communities. Not only do they create jobs and spur economic growth, but they also provide models for the businesses of the future, those that will thrive in a low-carbon, resource constrained world. The Global Impact Investing Rating System (GIIRS), used by investors worldwide to evaluate SME’s in developing countries, has adopted environmental criteria, thus raising the visibility of environmentally-focused businesses in emerging markets.
GIIRS is a standardized rating system that generates an easily digestible single value for scoring an emerging market SME and/or impact investment fund. Investment funds obtain a calculated GIIRS score based on the ratings of the portfolio of companies they invest in and the operations of the fund manager. GIIRS is crucial to the growth of the impact investing industry as it makes impact measurement accessible much like the Lipper or Morningstar ratings did for the mutual fund industry.
WRI’s New Ventures team persuaded the GIIRS managers to embed key environmental metrics into the ratings system in part through its position as the environmental expert on the GIIRS emerging markets standards advisory committee. By August 2010 eleven leading emerging market fund managers agreed to use the GIIRS rating system in their investment decision-making. Collectively, they have raised around US$1 billion to invest in high impact GIIRS-rated enterprises. These GIIRS “Pioneer Funds” will be pilot testing GIIRS with their portfolio companies throughout the developing world. Additionally, it has been adopted as the standard all companies and funds must reach to participate in the socially responsible angel network Investor’s Circle.
A social entrepreneur invests the little working capital she has to bring solar electricity to a community that –like 1.2 billion people worldwide– lacks access to electricity. The community used to use dirty, expensive and choking kerosene for light to cook by and for children to learn by. The entrepreneur knows she can recoup her costs, because people are willing to pay for reliable, high-quality, clean energy – and it will be even less than what they used to pay for kerosene. Sounds like a good news story, right?
Three months later, the government utility extends the electrical grid to this same community, despite official plans showing it would take at least another four years. While this could be good news for the community, one unintended consequence is that this undermines the entrepreneur’s investment, wiping out their working capital, and deterring investors from supporting decentralized clean energy projects in other communities that lack access to electricity.
Few countries are unaffected by China’s overseas investments. The country’s outward foreign direct investments (OFDI) have grownfrom $29 billion in 2002 to more than $424 billion in 2011. While these investments can bring economic opportunities to recipient countries, they also have the potential to create negative economic, social, and environmental impacts and spur tension with local communities.
To address these risks, China’s Ministry of Commerce (MOFCOM) and Ministry of Environment (MEP)—with support from several think tanks—recently issued Guidelines on Environmental Protection and Cooperation. These Guidelines are the first-ever to establish criteria for Chinese companies’ behaviors when doing business overseas—including their environmental impact. But what exactly do the Guidelines cover, and how effective will they be? Here, we’ll answer these questions and more.
While reactions to President Obama’s newly announced climate plan have focused on domestic action, the plan actually has potentially significant repercussions for the rest of the world. These repercussions will come in part through his commitment to limit U.S. investments in new coal-fired power plants overseas. If fully implemented, the plan will help ensure that the U.S. government channels its international investments away from fossil fuels and toward clean energy. The move sends a powerful signal—and hopefully, will inspire similar action by other global lenders.