"Developing Green Economies for Sustainability and Competitiveness" - Moscow, 22 April 2015
Your Excellency Sergey Donskoy, Minister of Natural Resources and Environment of the Russian Federation.
Shri Prakash Javadekar, Minister of State for the Environment, Forest & Climate Change, India;
Chen Jining. Minister of Environmental Protection, the People's Republic of China
Edna Molewa, Minister of Water and Environmental Affairs, the Republic of South Africa
Francisco Gaetani, the Brazilian Deputy Minister of the Environment, Brazil;
Esteemed guests, colleagues, ladies and gentlemen,
To begin, I would like to offer your Excellencies my warmest congratulations for the convening of the first BRICS Ministerial meeting on the Environment.
It is indeed a privilege to address this distinguished gathering and I extend my appreciation to you and the Russian Federation, our generous hosts, for this kind invitation, particularly to address the resolution of environmental problems and the sustainability of competitiveness of business in the context of green economy.
BRICS nations hold a special position of political and economic influence in these discussions. They account for more than 40% of the planet’s population, one fourth of its landmass, and one quarter of the global gross domestic product -- measured by the purchasing power of their national currencies. In 2013, they represented 16.1% of global imports and 17.7% of global exports, with almost 90% of exports going to non-BRICS countries.
UNEP has worked closely with BRICS nations though the past years, witnessing first-hand the leadership, vision and determination by BRICS governments to embrace a bold transition towards low carbon resource efficiency, inclusive green economic growth and overall sustainable development.
From Russia’s energy-saving policies and India’s ambitious renewable energy targets and forest-based budgeting to South Africa’s Green Fund, Brazil’s Sao Paulo sub-national green economy initiative and China’s articulation of the Ecological Civilization, BRICS nations are already pioneering the green economy transition in your domestic contexts.
Your efforts towards establishing an environmental public-private partnership mechanisms to facilitate the investment in green technologies and related environmental projects in BRICS countries, provides an opportunity to expedite and further strengthen the global transition to a green economy and will serve as a common platform for knowledge sharing, technology transfer and investment.
Innovative financial mechanisms under the BRICS, such as the soon-to-be launched New Development Bank and the Contingent Reserve Arrangement has the potential to construct an enduring green infrastructure, longer term competitiveness for the BRICS economies and strengthen South-South cooperation.
Excellencies, ladies and gentlemen,
2015 is a pivotal year for sustainable development.
The coming months will define the global development framework that will succeed the millennium development goals when they reach their target date at the end of this year.
The Third International Conference on Financing for Development in Addis Ababa in July will be a significant milestone in the global effort to achieve universal and sustainable development. The conference provides an opportunity to develop a pragmatic package of policies to complement the post-2015 development agenda and the adoption of the SDGs at the UN Special Summit for Sustainable Development in New York in September.
At the 21st Conference of the Parties (COP21) to the United Nations Framework Convention on Climate Change in Paris in December a new international agreement on climate change will be sought. With these three critical conferences taking place over six months, 2015 will create a platform to support global development aspirations for the next 15 years.
The BRICS nations hold a unique position as leading emerging economies and political powers at the regional and international level and the collective strength of the BRICS economies is of ever increasing importance to the strength of the global economy. Influence highlighted by a PriceWaterhouseCoopers (PwC) study titled ‘World in 2050’ (2013) states, “Whilst mature economies across the globe grapple with towering budget deficits, anaemic growth and rising unemployment, the BRICs are expanding rapidly, lifting people out of poverty and driving the global economy.
Therefore, the work undertaken through the BRICS platform will not only influence these processes, they are also necessary for unlocking myriad opportunities for future welfare, prosperity and development.
I recall, in this context, the Fortaleza Declaration and Action Plan, adopted at the Sixth BRICS Summit last July, where leaders reaffirmed their commitments to cooperate on environmental issues, including a successful agreement on climate change at COP 21; a commitment to support the SDG process and Post-2015 Development Agenda – in line with the Rio principles on sustainable development; and to promote the deployment of clean energy and energy efficient technologies — taking into account national policies, priorities and resources.
UNLOCKING CLIMATE FINANCE
As world governments intensify efforts to achieve a global agreement on climate change in time for the Paris Conference, it is no exaggeration that success in Paris will largely depend on progress and agreement on the issue of climate finance; and the prospect of mobilizing resources at the required pace and scale.
The World Bank estimates that over the next 15 years, the global economy will require $89 trillion in infrastructure investments across cities, energy, and land-use systems, and $4.1 trillion in incremental investment for the low-carbon transition to keep within the internationally agreed limit of a 2 degree Celsius temperature rise.
Tackling climate change requires economic transformation and a re-channelling of private finance.
There is no silver bullet for the mobilisation of private climate finance, which ranges from micro-scale rooftop solar voltaic installations to large-scale offshore wind parks; from the restoration of ecosystems such as mangrove systems to the climate-proofing of large man-made infrastructure.
Equally varied is the private financial landscape, spanning everything from micro-finance institutions to domestic banks to large infrastructure financiers and institutional investors.
PATHWAYS TO SCALE
Following the financial crisis, you as BRICS countries are helping focus how the financial system can fulfil its underlying purpose to serve the long-term health of the global economy.
If brought to scale, the US $300+ trillion global financial system could help close the widening gap in sustainable development investment.
Yet, financial markets do not tend to effectively price environmental resources, resulting in undervaluation of natural capital stocks such as clean air, productive soils and abundant water in 116 out of 140 countries across the world.
This becomes clear in the work of UNEP’s Inquiry into the Design of a Sustainable Financial System, which draws on work undertaken in 12 countries and across a range of critical sectors such as banking, insurance, investment and securities.
The Inquiry, launched in early 2014, explores what will potentially be one of the most important contemporary changes in our international economic and development landscape: the reshaping of our global financial system to fit the needs of sustainable development financing.
The Inquiry's high potential innovations include three major asset pools:
- Banking: Banks hold the largest pool of global financial assets (US$139 trillion), and leadership by developing countries such as Bangladesh, Brazil and China in 'green credit' regulations points to a new phase in international banking standards.
- Bond markets: The largest capital market (US$100 trillion assets) and fastest moving theme, with a tripling of 'green bonds' issuance in 2014 and the prize of incorporating sustainability factors such as climate risk into routine credit ratings.
- Institutional investment: With US$93 trillion in assets under management in pensions, insurance and sovereign wealth funds, new investment structures, changes to investor governance and reform of incentives (such as remuneration) could underpin the next generation of sustainable investment.
Our aim is clear: to speed the transition to an inclusive sustainable economy.
To do so, we need to channel trillions of dollars annually into green investment and many more trillions away from polluting and natural resource-intensive investment.
Meeting this challenge, in a nutshell, requires the mobilization of large amounts of private capital, as well as a concerted effort to develop policies that promote sustainable lifestyles and sustainable consumption and production.
China, with one of the world`s strongest fiscal positions, estimates that less than 20 per cent of its annual US S$350 billion incremental green-financing needs can be met through the use of public revenues.
In a marked departure from the past, emerging economies with rapidly developing financial and capital markets are playing a leading role in this all-important reshaping.
Brazil`s central bank has established environmental risk management requirements for banks, and is working with market actors in establishing how environmental lender liability might improve both environmental outcomes to Brazil and financial returns to the banks.
The People`s Bank of China has established a Green Finance Task Force, co-convened with the UNEP Inquiry, and is working with dozens of public agencies and market actors on developing 14 sets of proposals for enhancing green financing through policy, regulatory and market innovations.
South Africa`s stock exchange has led globally in requiring listed companies to report on their sustainability performance, The country`s pension fund legislation has led the way in requiring pension fund trustees to take sustainability factors into account in making investment decisions on behalf of intended beneficiaries.
Perhaps it is not surprising that developing countries are leading the way. After all, it is these countries that experience the worst effects of environmental degradation and climate change; impacting health, livelihoods and costing life.
Beyond this, however, are two further reasons for such leadership that I would like to highlight:
Firstly, development banks in emerging economies are built on the principle that financial systems exist to promote development. Secondly, financial systems in developing countries are evolving rapidly, and so the challenge is to design competitive sustainable routes.
Green bonds, such as those that have been issued by India to support renewable energy projects, can become part of the development of China`s bond markets, just as environmental and social considerations can be designed from the outset, and so more effectively, into the BRICS New Development Bank and the Asian Infrastructure and Investment Bank.
In a year such as 2015, when securing financing for sustainability — both broadly and for climate related actions — is such a critical theme and ambition, the opportunity exists to go beyond identifying ‘additional resources for sustainable development’ to shaping the contours of a new international financial system; one that is fit for the needs of an inclusive, sustainable, 21st century economy.
The innovative financial initiatives set by the BRICS present significant opportunities for building sustainable development and resilience across the BRICS nations, as well as in the context of broader South-South cooperation.
The Contingent Reserves Arrangement — with US $100 billion in initial funding for BRICS countries — and the New Development Bank, an innovative South-South financial architecture, could help close the widening global gap in annual environmental sustainable infrastructure investment, estimated at approximately US $ 1 trillion.
Environmental Goods and Services
At the same time, it is estimated that the global market demand for environmental goods and services is projected to rise from US $584 billion in 2004 to close to US $2 trillion by 2020, in particular the global market in low-carbon and energy-efficient technologies.
This presents yet another economic opportunity, especially for emerging economies.
Embracing such potential can help shift resource intensive economies towards a greener model that is more sustainable, competitive and knowledge-based.
Some experts still predict that fossil fuels will supply the majority of our energy ‘for decades to come’, but the evidence strongly points in another direction.
According to UNEP’s Global Trends in Renewable Energy Investment 2015, once again in 2014 renewables made up nearly half of the net power capacity added worldwide. Major expansion of solar installations in China and Japan and record investments in offshore wind projects in Europe helped propel global investments to US $270 billion, a 17 per cent surge from 2013 figures.
These climate-friendly energy technologies are now an indispensable component of the global energy mix and their importance will only increase as markets mature, technology prices continue to fall and the need to rein in carbon emissions becomes ever more urgent.
In developing countries, where renewables are best positioned to address the chronic lack of energy access, clean energy investment rose 36 per cent to US $131 billion. It’s well on track to surpass investment in developed countries, which amounted to US $139 billion, last year
· China saw by far the biggest renewable energy investments, last year — a record US $83.3 billion, up 7 per cent from last year (but below its all-time high in 2011.
· South Africa saw a 5 per cent increase in renewable energy investment to US $5.5 billion.
· Brazil invested some US $7.4 billion in renewables – with wind attracting 84 per cent of that investment.
· India pledged to raise its solar production to 100 gigawatts by 2022, while renewable energy investment reached US $2.4 billion in 2014. Better lending norms and loan tenors helped boost financing to US $7.4 billion, a 13 per cent increase on 2013, with wind attracting nearly half of the total investment.
Yet, the growth of renewable generation faces a mixture of old and new barriers, sometimes because of the very success of renewables. Coping with 25 per cent or more variable generation is more difficult for grids and utilities than managing a 5 per cent proportion.
Among the policy measure being taken to deal with high wind and solar penetration is a cap on renewables subsidies, capacity markets to keep fossil fuel plants open, the installation of phase shifting transformers to control loop flows.
If the positive investment trends in renewables are to continue, it is important that major market reforms in the electricity sector are implemented — of the sort that Germany is now undertaking with its Energiwende energy transition.
Excellencies, ladies and gentlemen,
A low carbon, resource efficient future is not just possible and desirable; it is imperative.
On a vital, basic level, our decisions and actions today will determine whether the ‘Anthropocene’ will be an age in which human ingenuity and responsibility will allow 10 billion people to have access to a sustainable future tomorrow, without compromising the vital life support systems of our planet.
As custodians of the future, it is our responsibility to make the right choices and seize every opportunity for a greener and more sustainable future.