3 November 2021
The Earth Dialogues for Climate and Finance, held yesterday at the Multilevel Action Pavilion, received a jubilant response from attendees as the discussions outlined new fiscal instruments for multilevel action on decarbonization and biodiversity conservation.
One of the groundbreaking announcements saw Regions of Climate Action (R20) partnering up with Pegasus Capital, IUCN and Gold Standard COPamong others, with support from the Green Climate Fund, to launch the first Global Subnational Climate Fund (GSCF), bringing $750 million USD to the table for cities and regions to strengthen their climate interventions.
A product of the Santiago-Glasgow Route process, which aims to consolidate city and regional advancement on the Nationally Determined Contributions (NDCs), the Earth Dialogues set a tone that subnational actors hope to see prevail throughout the two-week climate conference.
The two-fold structure of the GSCF will first provide technical assistance to subnational governments, helping them to design projects that are bankable as well as environmentally impactful. Second, it will provide an equity fund, enabling initiatives to adopt a more holistic design.
Christoph Nuttal, Executive Director of R20, underlined the importance of this fund in fast-forwarding local action. “How do you transform a plan into action? That’s difficult,” he admitted. “Translating a portfolio of projects into an opportunity that’s of interest to private, not just public, investors […] is a challenge.”
Latin American leaders also lauded the fund’s creation with Gustavo Manrique, Ecuador’s Minister for Environment, Water and Ecological Transition, noting that it was a historical opportunity for Ecuador, whose cities will benefit from the financial tools. “We have been working tirelessly to create mechanisms that return nature to its real value on the international market.”
The private investment sector has traditionally steered clear of investment in smaller, subnational projects due to the higher risks associated with these, but that’s changing, says Craig Cogut, CEO of Pegasus Capital Advisors. According to Cogut, the blended finance format of the Global Subnational Climate Fund, with junior capital provided by the Green Climate Fund, means the financial risk is lower and the GSCF can offer investors highly favorable returns.
“The years until 2030 are key to determining the future of humanity. It’s time to act and to therefore avoid the effects of climate change. The financial, political, and social mechanisms are in reach.”
Ruy Campos-Dugone – Executive Director of Green Cross UK
What could these additional funds create on the ground? As well as enabling wider participation and allowing subnational governments to take more ambitious action, it could also see a proliferation of nature-based solutions in climate plans.
Minna Epps, Director of IUCN’s Global Marine and Polar Programme, sees the growing interest of investors and the increased commitment to green finance as a sign that the market is waking up to the multiple benefits of sustainable pathways. “Nature-based solutions are integral to our work. We know that they can save $70 billion USD a year through ecosystem services. At COP26 today, we heard they could deliver up to 40% of the mitigation needed under the Paris Agreement. So we’re proud of this [GSCF] consortium.”
The dialogue also welcomed the launch of the first public-private contracts for carbon trading at the subnational level, led by Global Carbon Parks and supporting organizations. The contracts for over $200 million USD will be the starting point of a conservation economy for Latin America, affirms Sebastian Navarro, Global Envoy of the Santiago-Glasgow Route and Secretary of Capital Cities (CC35), as he shared how Latin American countries looked to use carbon capture as a means of financial conservation efforts.
Navarro also lauded the political will of cities and regions, announcing that the Dominican Republic had become the first country to have all of its 158 local governments sign climate commitments in Race to Zero, under the Alcaldes por el Clima initiative, led by Capital Cities CC35.
Green Cross UK also presented the Climate Positive Awards for 2021, in recognition of the work of leaders in slowing global warming and increasing global protection by 30% by 2030.
Political and economic will were hot points of discussion, but so was innovation. Some of the inspirational innovations emerging from the novel mixing of financial and climate tools included a credit card that sets a limit on spending when its owner reaches their daily carbon emission count. Developed by Doconomy, its CEO, Mathias Wikström, explains the concept: “We are making use of the language of the financial system but using it to cater to the fragility of ecological systems. Instead of taking into account the damage done on your wallet, we’re taking into account the damage done to the planet.”
Using a familiar format is the best way to raise awareness of climate impacts, agrees Rene Saul, Co-founder and CEO of Kapital SmartBank, a mexican fintech. In the Kapital SmartBank app, customers can see the carbon cost of their spending. “What we’re doing right now in Mexico is to let people know, when they make a purchase, let them know how many emissions that purchase has produced. Education is the best way to fight”, maintains Saul.
It’s clear that these three green finance announcements will be milestones for subnational governments, but cities and regions still have their work cut out. Much depends on whether national governments and the international community follow through on their promises of multilevel climate action and on whether COP26 will distance itself from the failures of previous COPs or join the ranks. All gazes remain firmly fixed on Glasgow, all hopes too.
This blog was written by Braoin MacLauchlan, Communications Assistant at ICLEI World Secretariat.