One Planet Summit – Can finance do its bit?

A month after the last Bonn climate conference, COP23, the One Planet Summit took place in Paris at the initiative of the French president, co-chaired with the World Bank and the UNFCCC. Fifty-six heads of state and government gathered for a day with representatives of banks, companies and financial institutions to mobilise the financial sector for the implementation of the Paris Agreement.

Acknowledging decades of insufficient progress of climate international negotiations and low public intervention nationally, Mr Macron declared “we are losing the fight” against climate change and Mr Guterres added “with fossil fuel subsidies, we are financing our own doom”. The objective of the summit was therefore to accelerate the transformation of ways of manufacturing and support, mainly financial, targeting specifically the financial sectors. Involving country leaders and company directors seemed necessary to develop greater commitment to faster action.

Several initiatives were officially launched. Notably the Stockholm sustainable finance centre, the Tony de Brum declaration to tackle maritime transport emissions, a coalition of the six biggest national sovereign funds, creation of new green bonds for renewable energy and resilience, the launch of carbon markets in China and Mexico next year, and the insurance company AXA’s divestment of 3 billion euros of assets in coal and tar sand companies. Many companies and countries also committed to increasing transparency of investment by including climate risk disclosure in their annual reports. This is something obvious and inexpensive to do but seems up to now to be a hurdle for many.

Some of the announcements made throughout the day were already known or repackaged for communication purposes. For instance the EU Commission will dedicate nine out of the 44 billion euros of its new External Investment Plan for Africa, to resilience and renewable energy in cities and agriculture. This plan has already been launched last week at the EU-AU summit in Abidjan, and 10% of this amount will come from public sources in order to leverage the rest of the sum committed. How the public finance will be used is currently unknown, whether as grants, a guarantee reserve or loans. The leveraging ratio seems ambitious. Nor is there much clarity to the type of projects which will be funded.

But the biggest news and by far the real game-changer commitment came from the World Bank itself, committing to end oil and gas investments from 2019, a long-awaited decision which surprised many observers. This has already triggered one significant repercussion, with the European Investment Bank’s board of directors having to postpone its decision concerning a 1.5 billion euro loan to build a new gas pipeline from the Caspian Sea to Europe. This will hopefully encourage other multilateral and national development banks to follow this move to keep as much fossil fuel as possible in the ground rather than in the atmosphere and ocean.

Saint Lucia, Haiti and the Fiji were the only countries voicing their concern during a day that was otherwise characterised by self-congratulation. They highlighted existing problems which should be taken seriously by both public and private financial sectors. For example OECD countries’ pledges are slowly delivered and rarely in full or using “fake” support such as concessional loans for reconstruction, thus locking recipients into new debt and undermining their economies. Also there is a clear lack of adaptation finance made available, while current risk insurance schemes are only covering a tiny share of total extreme weather event costs.

Was this summit necessary or is it competing with the intergovernmental process of the UNFCCC? Probably a little of both as on one hand the level of urgency to keep global warming below 1.5C requires the finance industry – one of the greatest systemic contributors to climate change – to change and work for transition towards renewable energy and resilience. On the other hand it is disappointing that nations are not capable of acting together ambitiously and collectively. The Paris Agreement is no longer under threat from President Trump, but our common future will depend on business opportunities which are “green”. One cannot expect the finance industry, which is at the heart of global warming, to suddenly be the solution. More transformation is needed, more solidarity is required.

Full list of announcements: https://cop23.unfccc.int/news/one-planet-summit-finance-commitments-fire-up-higher-momentum-for-paris-climate-change-agreement and http://europa.eu/rapid/press-release_IP-17-5163_en.htm