Leveraging Innovative Finance for the SDGs: Incentives, Models, Tools

1. SESSION IX Leveraging Innovative Finance for the SDGs Incentives, models and tools 5 MARCH 2019

2. FINANCING THE SDGs FRAMEWORK

3. Working With The Private Sector on Climate Change Presented by Erik Davies March 2019

4. We have come a long way… Pre 2002 Lack of trust internationally Yet many partnerships with business at local level achieved development goals The World Summit on Sustainable Development (2002) Business officially recognized as development actors Today 2019 Mobilizing significant private investment to address climate change

5. Moving from CSR To Sustainable Markets Projects Traditionally governments and donors have tapped into big business through their CSR programs for project financing. CSR programs represent a tiny part of what business can contribute Enabling sustainable business models will mobilize significant investment from business – since this talks to their bottom line.. Sustainable Markets

6. How Does Business View Climate Change Risk Markets Opportunities New markets with new players: Wind, solar, battery storage Zero emission vehicles Autonomous aquatic robots for collecting ocean plastics Product differentiation: Blockchain & Supply chain finance (Traceability & Transparency) Consumers are demanding sustainable products Driven by improved: access to information on how products are made (internet) Education regarding impacts of production Global Brands are starting to drive GHG reductions across their supply chains Extreme weather and associated disease outbreaks disrupt business and destroys capital investments (Thailand’s floods 2011) Stranded assets in oil, coal and natural gas (Investor Risk, lost jobs, lost business) GHG emissions and air pollution can result in regulatory fines, and bad press

7. Business Response Supply Chain Corporate Sectoral Business can respond to climate change at 3 levels: Corporate: focuses on all aspects of operations Supply Chain: working with suppliers to manage their impacts Sectoral: working with broad set of stakeholders to drive change

8. The Business Response (cont) Many businesses are changing in their operations and driving reform in their supply chains. The degree to which this is happening depends upon: Business incentive: - how climate impacts profits Capacity, resources and skills available to respond External Support to navigate change In this respect there have been some interesting innovations to how businesses are response to the climate challenge.

9. Collaborative Initiatives Green Freight Asia Clean Cargo Working Group Renewable Energy Buyers Alliance BSR develops collaborative initiatives among multinationals trying to address climate change. A few examples include: Shippers and carriers in Asia committed to reducing GHG emissions (IKEA, DHL, Heineken, etc.) Creating markets for renewable energy (63% of Fortune 100 companies have targets to reduce GHG emission or buy renewables) Represents 85% of global freight carrying capacity. Its members are committed to reducing environmental impacts and GHG

10. Collaborative Initiatives & Government While the resources of large companies are considerable, collaborative initiatives have also taught us that government support is crucial. • Many have benefited from donor support at start-up • Collaborations have helped identify opportunities where government interventions are required to create more sustainable markets. • REBA identifies regulatory barriers and other challenges to procure renewable energy. • GFA needs help reaching SMEs and creating financial incentives for fleet upgrades • Once these “barriers” are removed, the benefit of government support is the creation of a sustainable market driven by long term private sector investment

11. How Governments Can Support Sustainable Business Governments successful in creating vibrant business environments do so by providing: • Clear streamlined policies and regulatory frameworks that align the work of ministries and send a clear, consistent signals to business. • Tax incentives and disincentives on products etc. • Subsidies for green businesses and removing perverse subsidies • Educate and raise awareness SMEs on climate change issues • Develop enabling infrastructure (smart grids, charge stations, etc) for new business • Work with banks to provide accessible financing that reduces risk • Eliminate corruption and increasing transparency These measures have consistently been shown to encourage business investment by creating safe, sustainable markets

12. How Governments Can Partner With Business Create start-ups that contribute to climate resilience in your country Support collaborative initiatives by addressing barriers identified that free up market investments Challenging times require innovation. Don’t be afraid to try something new!  • Public Private Partnerships • Cross Hiring From Business • Consultative Groups • Developing Incubators For New Business • Invent something new! • Collaborative Initiatives Design, Build, Operate, Decommission Traditionally for infrastructure projects but are being adopted Investigate challenges facing businesses by forming working groups with industry Hire people from the private sector to increase your capacity and understanding of business issues

13. The Bottom Line Successfully engaging business requires: Speak their bottom line Developing clear policies, regulations and incentives to support the development of sustainable markets Proactively engaging business in multiple ways to develop trust, understanding, and drive innovation.

14. Parallel Sessions • Climate Smart Investments – Alpha Room – GREEN • The Business of Climate Change – Beta 1 Room – PINK • Scaling-Up Climate Finance Readiness through Public-Private Partnerships – Beta 2 room- BLUE • Social Impact Investing – Delta Room – MINT • Green Finance – Epsilon Room – ORANGE • Risk Financing – Gamma Room - YELLOW