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Davos: Financial institutions say clean energy revolution requires a step change in public and private finance

26 January 2011
Davos: Financial institutions say clean energy revolution requires a step change in public and private finance
  • Financial institutions and power companies say clean energy revolution could cost an additional $46 trillion* on business as usual but greater collaboration with each other will help overcome current barriers to unlocking private sector finance
  • Public-private partnerships aimed at unlocking fast-start funding for clean energy projects in developing countries provide the largest opportunity for both sectors
  • Incorporating the risks and opportunities of climate change into project finance remains a key area of focus for the finance sector in 2011

Davos, Switzerland, 26 January 2011 – International NGO, The Climate Group, and the Institutional Investors Group on Climate Change (IIGCC) hosted a meeting for international leaders from the finance and energy sectors at the World Economic Forum in Davos today.  The discussion centered on ways to work together to tackle the opportunities and challenges in financing a clean energy future.

Mark Kenber, CEO, The Climate Group, said: “The critical trinity of investors, power companies and governments must collaborate in order to bring about the clean energy revolution required if the world is to successfully tackle climate change.  Only by working together can we create successful policies that unlock the scale of financing required and drive long-term, low carbon prosperity.”

Present at the lunch were members of the IIGCC and financial institutions that have adopted the Climate Principles – a global guide for the finance industry to addressing climate change. Both groups have made investment in a clean energy future a focus for work in 2010-2011.

The IIGCC has just launched a global investor survey to canvas how investors take account of climate risks and opportunities in their investment practices and decisions. When it’s published in Spring, the report will provide a practical tool for investors to benchmark their performance on managing climate risk and opportunity against international peers.

Ole Beier Sørenson, Chairman, IIGCC, and Head of Research and Strategy, ATP, said: “With the right policy frameworks in place at national and international levels, money will be available for climate finance and the deal flow for low carbon projects will be improved. Multilateral and bilateral development banks can also help to accelerate private sector investment in developing countries through the smart application of public financing mechanisms which lower the additional risks that investors face in developing countries.”

Criticized in some quarters last year for a lack of progress in the area of project finance, the Climate Principles adopters’ ‘Clean Energy Working Group’ has been working on a guidance note that will provide a best practice framework for the sector’s future investment in coal-fired power, which it hopes to publish in 2011 following consultation with power companies. The Climate Group has led broader discussions on what is required to accelerate investment in large-scale renewable energy.

Francis Sullivan, Deputy Head of Group Corporate Sustainability, HSBC, said: "Financial institutions recognize that they need to understand the business risks and opportunities presented by climate change. Together we can help support the decarbonization of the power sector and this has been a focus for the Climate Principles FIs in the last twelve months. HSBC sees major opportunities in this area and we have made a number of strategic investments in companies that are set to benefit substantially from the growing climate business sector. We also updated our Energy Sector Policy in 2010 to reduce climate risk and to ensure our customers operating in this area meet our standards." 

The Climate Principles Progress Review, released today, showed that while good progress has been made by adopting institutions in advancing the quantity and variety of funding they make available to develop low-carbon technology business and emissions reduction projects, challenges still remain, particularly in retail banking. The report, produced by PwC for The Climate Group, said that greater disclosure on activities the institutions are taking to address climate issues internally and externally would help demonstrate the group’s leadership on addressing climate change, and improve understanding and awareness within the industry and amongst the general public.

Jon Williams, Partner, PwC and author of the Progress Review said: “These financial leaders are making strong headway, and they can help spur the rest of the industry on if they further increase transparency and engagement around their initiatives. The IEA estimated that investment under business as usual is $270 trillion from now to 2050, and a low carbon revolution will cost $46 trillion more. Public-private partnerships are the biggest opportunity for securing this level of investment.”

In his keynote remarks, Andrew Steer, Special Envoy for Climate Change at the World Bank, said: “Public-private partnerships present enormous opportunities for the finance industry, but they will also be crucial to the global effort to combat climate change. Leading institutions could play a formative role in developing public-private partnerships to accelerate and leverage the “fast start funding” pledged to developing countries to help them adapt to climate change. Continued engagement from the industry will also be a success factor in the next UNFCCC.”

Helen Henton, Head of Energy and Environment Research at Standard Chartered, said: “Transformation of the energy sector for a low carbon economy is still possible, but it must be led by policy that is supportive of long-term investment.  China’s emergence as a primary destination for renewable energy is evident of this. In 2009, the country attracted 33.7 billion in renewable energy, almost double that of the U.S.”

Chair of the Climate Principles group, to which The Climate Group acts as Secretariat, was passed from HSBC to Crédit Agricole in 2011.

Jerome Courcier, Chief CSR Officer, Crédit Agricole, said: “I am looking forward to continuing to push the clean energy agenda as Chair of the Climate Principles group in 2011, as long as it is one of the four areas of strategic implementation of Crédit Agricole’s ten year Group Project.”

* International Energy Agency, Energy Technology Perspectives 2010, OECD/IEA, (2010)

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