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Why We Must Engage the Private Sector in Climate Change Adaptation Efforts

Alan Miller's picture

 Lauren Day/World Bank

Late last month, I retired after spending more than 30 years in the climate arena, the last decade as a principal climate change specialist at the International Finance Corporation.

During the span of my career, climate change has moved from the sidelines to be recognized as a serious development challenge. And while we’re still far from achieving the international commitments needed to avoid potentially dangerous and even catastrophic climate events, much has been accomplished.

Scientists have reached near-consensus about climate change and its impacts. We’ve also seen the creation of several significant donor-supported climate funds, as well as a steady increase in policy and financial support for climate-friendly technologies.

In one critical respect, however, we need more progress: making the private sector a partner in helping nations build resilience and adapt to climate change.

Forging a new path forward on climate change

Vipul Bhagat's picture

As world leaders convene in Doha for this year’s UN Climate Change Conference  developing countries are looking for ways to maintain momentum for change to help them transition to climate-smart growth.

When it comes to delivering improved, cost-effective infrastructure and services – a precondition for green growth – public-private partnerships (PPPs) are one way forward. At a recent event co-sponsored with the United Nations Development Programme (UNDP) in Doha, we shared our unique perspective on public sector efforts to attract and leverage private sector climate finance through PPPs.

Some key takeways from the event include:

  • PPPs help tap new money for infrastructure:  Since the 2008 financial crisis, governments have limited financial resources to devote to capital expenditures and expanded public services. Involving the private sector offers a solution.
  • PPPs boost efficiency through cost savings and shorten delivery periods. They also spur innovation by bringing in private sector know-how.
  • PPPs facilitate projects under one umbrella: When it comes to climate initiatives, PPPs can efficiently organize and consolidate the numerous and complex arrangements that make a renewable energy (or any other climate-related) project work.
  • PPPs allow for appropriate allocation of supply and risk demand to the private sector, reducing taxpayer costs.
  • Since 1989, IFC has been the only multilateral institution providing advice to national and municipal governments on designing and implementing PPP transactions to improve infrastructure and access to basic services such as water, power, agribusiness, transport, health and education.

Climate for change in Istanbul

Joumana Asso's picture

A view of the Blue Mosque in Istanbul, Turkey. - Photo: Shutterstock 

As the Climate Investment Funds (CIF) and its stakeholders from the private sector, government,  the multilateral development banks, civil society and indigenous peoples’ groups gathered in Istanbul to participate in the first CIF Private Sector Forum, their attention is increasingly focused on synergies between the private and public in addressing climate change.  There is a growing understanding among both governments and private sector players - from investors to small project developers to large utility companies - that gains are much larger if common strategies are developed and new partnerships are forged.

Michael Liebreich, CEO of Bloomberg New Energy Finance, opened the day with an energetic keynote address, provocative and positive, setting up the stage for the day by announcing the scope of challenge and opportunities for dynamic, and pragmatic climate investment strategies. Sessions on private sector adaptation, and business attitudes towards climate risk followed. The `Matching Expectations' panel brought together indispensable partners, the triangle of project developers-investors-policy makers, into discussion of regulations, fund raising challenges and investors' expectations and requirements. 

The day also showcased five CIF projects, beginning with the highlight of the Morocco Ouarzazate CSP project, a unique PPP model, presented by Paddy Padmanathan, the CEO of the project's developer ACWA Power. 

Consensus emerged that the private sector will deliver much of the innovation and finance required for investments in low carbon technologies and climate resilience in rich and poor communities alike. With scientists warning that we are not on a path to limit global warming to 2° or less, there is growing urgency to identify effective ways in which the public and private sectors can best work together to tackle and adapt to climate change.  The CIF provide a platform for learning by doing to develop such models for effective collaboration and share experiences among the network of CIF recipient and contributor countries.

Time to engage the private sector on climate finance

Alan Miller's picture

I was at the Climate Investment Funds meetings in Cape Town last week with several other representatives from development banks, NGOs and governments to discuss results, impacts and the future of this financial mechanism. One of many themes cutting across meetings in Cape Town was the importance and challenge of engaging the private sector in climate finance. The private sector is by far the largest source of investment, the dominant provider of technology, and often essential for implementation of mitigation and adaptation measures. However, based on the discussions this week, it’s apparent there is much to learn about what is actually expected or sought from the business community. Here are some of my observations from the meeting:

  1. In my experience references to “the” private sector are common but largely meaningless and often confusing in failing to distinguish between entities as different as major multinational manufacturers, international financiers, and locally- based entrepreneurs. Some speakers even used the term more broadly to encompass markets, including policies directed at consumers.
  2. There are some unavoidable tensions between emphasizing country plans and priorities and the promotion of markets for climate-friendly products and services. This is particularly true in smaller and poorer countries. Control of donor resources is fundamental for many governments but sometimes difficult to reconcile with the flexibility, consistency, and speed required by investors. Public-private partnerships (the focus of a Cape Town session) is one solution but not always appropriate or workable.   Finding models which can blend the two, as in the collaborative IFC/World Bank Lighting Africa project, will be increasingly important. The World Bank was able to build a relationship with energy ministries while IFC focused on helping businesses. Together, they have been able to address a wide range of issues from regulatory systems to that of supply chain development.

Getting on a technology pathway to avoid dangerous climate change

Alan Miller's picture
   An IFC investment helps provide clean, affordable water to underserved communities in developing countries.

Many of the measures proposed in the World Development Report (WDR) 2010 will require substantial engagement with the private sector. The UN Framework Convention on Climate Change has estimated that more than 80 percent of the investment required for climate change mitigation and adaptation will have to be privately financed. For this to happen, the key requirement will be meaningful targets and supportive public policies.

One area in which private initiative will be critical is in the development and dissemination of new climate friendly technology. As the advance edition of the WDR states, "Technological innovation and its associated institutional adjustments are key to managing climate change at reasonable cost. . . . Mobilizing technology and fostering innovation on an adequate scale will require that countries not only cooperate and pool their resources but also craft domestic policies that promote a supportive knowledge infrastructure and business environment."

For several reasons, an increased focus on accelerating new technology is urgently needed.

Green solutions from Ghana

Kwasi Owusu Gyeabour's picture

The author, Kwasi Owusu Gyeabour, won third place in an international youth essay competition sponsored by the World Bank and other partners. He answered the question “How can you tackle climate change through youth-led solutions?” The awards were announced in Seoul in June, 2009.

There is never a time in the future in which we will work out our salvation. The challenge is in the moment, the time is always now.” -James Baldwin (1924 - 1987) Nobody Knows My Name, "Faulkner and Desegregation

It is a privilege to be called on to share ideas on issues of our time, issues that can be solved through youthful action. In my essay, “Greening the Ghanaian Youth” I proposed several ideas that would help tackle climate change. Here is a sample of the ones I consider most practical.

Youth action at the community level is the most potent force in our fight against rapid climate change. So I proposed the establishment of a Green Sector Mutual Fund. This community-based fund will invest in firms that operate in the green/environmental sector. Now I consider this feasible because I have friends who have established mutual funds such as the University of Ghana Campus Mutual Fund which have turned out successful. The success of a fund mostly depends on factors such as advertising and the prestige and market reach of the fund managers. Most asset management firms these days would jump at the opportunity to manage something ethical just to create a sense of social responsibility and goodwill.