The sixth biennial Mayor’s Summit on climate change, the C40 Cities flagship event, concluded in Mexico earlier this month. The event attracted mayors and leading thinkers from around the world to advance a shared agenda through collaboration and knowledge sharing on the global potential of climate actions in cities.

The world’s cities are at the forefront of climate change, both in the fight against climate change and in experiencing its impacts. Cities emit more than 70% of global emissions and consume around the same proportion of the world’s primary energy. At the same time, they generate 80% of the global Gross Domestic Product (GDP). In the face of rising global temperatures and increased incidence of climate induced disasters, urban structures and services are particularly vulnerable to the impacts of climate change such as heatwaves, storm surges and rising sea levels.

According to recent estimates, the world’s big cities need a total investment of US$375 billion to curb climate change. “It is a lot, but there is no other option. Together we will seek that money,” said the new president of the C40 network of big cities, Paris Mayor Anne Hidalgo at the Mayor’s summit. If that amount is made available “humanity will have a chance of surviving,” she added.

Climate change puts the squeeze on developing cities

Cities around the globe but particularly in low income countries, face a number of challenges: high population growth, limited access to water and sanitation as well as poor housing. These problems are likely to worsen with climate change. To build climate resilience in cities, urgent steps are required. These include, but are not restricted to, building disaster resilient infrastructures, improving drainage and storm water collection structures, constructing flood protection embankments, developing green zones and relocation of vulnerable groups living in hazardous areas of the city.

To boost mitigation and reduce greenhouse gas emissions, city governments can promote a number of ‘climate friendly’ measures in the sectors of energy, transport, waste and land use. These include reducing energy consumption in buildings via installation of solar water heaters, adding adequate insulation, double glazing windows, improving architectural design as well as encouraging energy efficiency measures. In addition, low carbon measures in the transport sector such as, incentivising the use of public and non-motorised transport, and reducing private vehicle use, can substantially reduce emissions.

Cities can fund climate projects from multiple sources

Considerable financial investment is required to meet these adaptation and mitigation needs of cities. To finance this paradigm shift, cities can access funds from a variety of sources including international, domestic and local sources – according to the new CDKN-Germanwatch report Hand in Hand for Urban Transformation. Says Lisa Junghans, Policy Advisor on Climate Change at Germanwatch, “the sheer scale of investment needed to transform cities into climate compatible urban spaces makes all three channels relevant. While locally-raised funding is important to strengthen ownership and safeguard the sustainability of interventions as well as the stability of revenue, it will take time to establish governance structures that ensure a steady flow of local revenue dedicated to climate change work,” she explains.

National sources are also important and it is the state’s responsibility to allocate resources to implement climate change adaptation and mitigation activities in selected cities. However, in view of resource constraints, particularly in developing countries, these allocations are inadequate to meet financing needs. International funds, are required to close the financing gap and fuel climate compatible development in cities.

Accessing international climate finance is not without challenges, and given the sheer scope of financing required, will not suffice to meet all requirements. Nevertheless, international funds remain crucial not only to meet the stated objectives of a proposed project, but also to catalyse the deployment of national or sub-national resources.

Financing climate action in Asian cities – Insights from CDKN research

A project funded by Climate Development Knowledge Network (CDKN) is working to assess the climate finance needs and gaps in three cities across three countries – India, Indonesia and the Philippines. Based on research and extensive stakeholder consultations, the assessment has outlined possible sources of domestic and international sources for cities, including from the Green Climate Fund (GCF) – the primary fund for channeling a significant part of the US$ 100 billion committed for combatting climate change in developing countries.

Recommendations for accessing funding from the GCF include the creation of innovative access modalities such as cities themselves serving as implementing entities. Also proposed is a National City Facility that receives GCF funds and coordinates urban climate change projects across the country.

Hammad Raza, Regional Coordinator, CDKN and General Manager Programs at LEAD Pakistan explains further. “For cities to move towards transformative low-carbon and climate-resilient development, steady and predictable financial revenues from domestic and international resources are essential. The recommendations compiled by the project are equally applicable to most cities in developing countries, be it Colombo, Addis Ababa or Faisalabad.”

Need for new capability in cities

One of the barriers to enhancing the flow of climate finance for cities is the lack of technical and institutional capacity in city governments. While local authorities understand the problems and potentially transformative solutions required, turning them into bankable project concepts or proposals remains a challenge. Moreover, city institutions find it difficult to meet the requirements set by funding institutions on fiduciary standards and social and environmental safeguards. However, concerted efforts for capability building and training can help cities overcome these barriers to receiving international assistance. This international assistance in the form of financial and technical support that can be used to fund build resilience and fuel low carbon economic development in cities of developing countries.

The author is Country Programme Manager, CDKN Indonesia, and Team Leader, Climate Finance Readiness at LEAD Pakistan. Read the full report here: Hand in Hand for Urban Transformation

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According to the International Environment Agency (IEA’s) World Energy Investment Outlook, $53 trillion is needed to put the world on a path that would see global temperature increase limited to 2 degree Celsius — generally accepted as a ‘safe’ increase, within which climate change would not spiral out of control. This is a phenomenal amount and meeting this scale and pace requires transformational changes in the public and private climate financial architecture.

This article explores the reasons and incentives for private sector contributions, and why investing in mitigation efforts and adaptation initiatives is not just important to meet the challenges of climate change but can also make good commercial sense for businesses.

Climate change can bring new risks or exacerbate existing ones, which may affect a company directly through its own operations, or indirectly through its value chain. In Pakistan, climate-induced disasters have seen a steep increase in the last two decades. These disasters have affected not just human lives and livelihoods, but also small and large businesses. In Karachi, for instance, 1,200 people lost their lives in 2014 to a severe heatwave, and the national exchequer suffered a loss of several thousands of dollars. Similarly, the 2010 floods severely impacted the agriculture and fisheries sector and led to damages worth almost $10 billion.

It is evident that risks such as increased commodity or input prices, disruption of supply chain, changing market demand or reputational issues can have a negative impact on a company’s profits. Therefore, avoiding, ameliorating and combating the risks associated with climate change is the first and foremost incentive for climate investment by the private sector.

The negative impacts of climate change are expected to increase in the coming years. Particularly susceptible are sensitive economic sectors, those with high value fixed assets, and those having extensive supply chains. The agriculture industry, which forms the backbone of Pakistan’s economy, is likely to be severely impacted by changing weather patterns and unpredictable availability of water. Similarly, several industries that have their infrastructure near the coast will suffer damage from rising sea levels and sea water intrusion. Therefore, it is important to climate proof investments, assets and infrastructure now, so as to provide an insurance against higher losses in the future. Contributions from the private sector can play a pivotal role in this.

While many private sector companies are familiar with the risks brought by climate-induced disasters, there is less familiarity regarding the opportunities that climate change brings. Early movers can maximise on the benefits brought by increasing demand for new products and services and capitalise on these opportunities. Business ventures that develop products to reduce greenhouse gas emissions or build climate resilience are more than likely to become increasingly popular in the future. Take the case of the Rahimafrooz Group in Bangladesh. The company was established in 1954 and entered the green energy market with solar battery products. When the climate change agenda gained momentum in the 1990s, a significant amount of development funds was channelled to encourage alternative sources of energy.

Over the decades, Rahimafrooz grew in size, scale, and diversity and now has over 3,000 people employed directly and a further 20,000 indirectly, as suppliers, contractors, dealers and retailers. Similarly, Allianz Insurance Company, previously providing flood insurance only in India, has expanded its operations to six other countries in view of increasing demand. In Pakistan, NESPAK (National Engineering Services Pakistan) prepared national guidelines for disaster resilient housing, following the 2005 earthquake. Their reputation of having the required skills and technical capacity to build disaster resilient infrastructure has created a major business opportunity for the company.

The agriculture sector, though one of the most vulnerable, also has the most incentives to invest in climate resilience. According to research carried out by PricewaterhouseCoopers, globally, world seed markets were worth $45 billion in 2012. If a low estimate of 20 percent of those markets was at risk from climate change, there could be a market of $9 billion for climate resilient seed types. In Pakistan, investing in research and development of climate resilient seed varieties, such as drought resistant and saline resistant seeds, will not only help feed a burgeoning population, but also make good commercial sense for investors. Similarly, business savvy investors can capitalise on the opportunities in the energy, insurance and financial sectors to ensure viability of their investments.

One of the opportunities for the private sector lies in accessing vast amounts of international climate funding streams available for countries like Pakistan. Advanced economies have formally agreed to jointly mobilise $100 billion per year by 2020, from a variety of sources, to address pressing mitigation and          adaptation          needs in developing countries.

The Green Climate Fund (GCF) is a comparatively new funding institution, having started operations in 2014. However, it is currently the most important one, since much of the climate finance for developing countries will be channelled and disbursed by this fund. Accessing funds from the GCF is dependent on meeting the stringent fiduciary standards and submitting ‘bankable’ project proposals in line with the fund’s requirements and national development priorities.

The GCF recognises that the private sector is a crucial player for climate investment and has a special Private Sector Facility, with a mandate to fully engage private sector investors, developers, entrepreneurs, corporations, and small- and medium-sized enterprises (SMEs) in climate-sensitive and resilient projects, throughout the developing world.

Ali Tauqeer Sheikh, CEO of LEAD Pakistan, says: “Companies can access international climate funds to finance initiatives such as solar parks, wind farms, disaster resilient infrastructure, flood protection embankments, even mass transit transport schemes such as the metro bus”. He also says: “And in this manner, a company can not only contribute towards climate compatible development but also gain monetary benefit.”

In Pakistan, private sector climate investment has so far been rather small. However, given enabling conditions and removal of existing barriers, the private sector can perform a critical role in building an alternative future for the country. This is because contributing towards emissions reduction and building resilience will not only contribute towards combating climate change but, if done right, can also ensure a high rate of return.

The writer works as team leader, Climate Finance Readiness in the Climate Action Programme of Lead Pakistan. This article first appeared in ‘The News’, Pakistan, Nov. 2016.

Email: fovais@lead.org.pk

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It is widely accepted that preparing for the adverse impacts of global climate change and preventing more dangerous levels of green­house gas emissions will require financial resources on an unprecedented scale. In an effort to meet these needs, Parties to the 2009 United Nations Framework Convention on Climate Change (UNFCCC) Copenhagen climate summit committed to the goal of jointly mobilising $100 billion a year by 2020 for climate change mitigation and adaptation activities in de­veloping countries. This pledge was reiterated in the UNFCCC Paris Conference of Parties in 2015.

According to the Climate Policy Initiative, global climate finance flows have been steadily increasing and reached at least $391 billion in 2014 due to an increase in public finance and a record private investment in renewable energy technologies. In this context, the question of how to measure, report and verify (MRV) these in­creasing climate finance flows has gained greater importance in the last few years.

In Pakistan, there is limited understanding about climate finance and the requirements, methodology and need for MRV of climate flows. In view of this, the Climate Finance Readiness Focus area at LEAD Pakistan organised a Roundtable Discussion on ‘Monitoring Reporting and Verification (MRV) of Climate Finance: The Role of Non-Governmental Organisations (NGOs) and Civil Society’ on 27^th of October, 2016. The objective of the event was to inform NGOs and civil society Organisations (CSOs) on their potential role in monitoring the flows and usage of international climate finance in Pakistan; to provide a platform for organisations to work together to ensure transparent use of climate investment; as well as discuss recommendations for effective use of climate spending in the country in line with developing properties. Representatives from international and local NGOs and CSOs attended the roundtable.

Presenting a brief overview of the global financial landscape, CDKN Regional Research Manager Hammad Raza outlined the basics of climate finance to participants of the Roundtable. He explained that with increasing flows of climate finance, developing and implementing appropriate MRV systems is no longer a choice, but a necessity.

Monitoring or measurement starts with defining ‘climate finance’: what kinds of projects and activities are covered, and what portion of a project with multiple objectives targets climate objectives. Reporting relates to the ways in which funding providers make their financial information and data available to third parties. Verification is more subjective and covers evaluation activities such as ensuring that the reported data is correct, how funds and financial re­sources were used and how effective they have been for emission reduction or resilience building.

To date, the majority of the climate investment has focused on low carbon development and the emphasis of MRV systems has been on tracking the effectiveness of mitigation efforts and initiatives. However, this is slowly changing. Ali Tauqeer Sheikh, Chief Executive Officer of LEAD Pakistan and Regional Director of CDKN, stressed the need of developing methodologies to track climate finance spending for building climate resilience and adaptation. This is particularly important for developing countries like Pakistan that are low emitters of greenhouse gases, but highly vulnerable to climate change impacts and need to access large volumes of adaptation finance to spearhead their development. Mr. Ahmad Ali Shah from Social Aid gave the example of REDD+ projects in the country and how NGOs can become involved to monitor this effort to reduce deforestation and control greenhouse gas emissions.

The participants were briefed about the functions, outcomes and challenges of implementing MRV systems in developing countries. Implementing these is important to build trust, accountability and transparency between the donor and recipient of climate finance, as well as verify that the stated objectives of combatting climate change are being met. While methodologies are available to measure and report on international climate financing, tracking climate investments from domestic public budgets and private sector remains challenging. Mr. Shahid Nawaz from Save the Children reiterated the importance of expanding the monitoring net to capture ongoing climate change projects supported by the private sector.

Hina Lotia, Director Programs at LEAD Pakistan, outlined the role civil society can play in MRV of climate finance at the national and sub-national level. This is particularly important for verification i.e. to assess how the funds have contributed towards climate resilience, reducing poverty and meeting national development priorities. In Pakistan, the methodologies for verification are still in infancy and need to be refined a great deal. In this context, civil society can support the government in developing and implementing these methodologies at the project and programme levels. Ghazala Raza from United Nations Industrial Development Organization (UNIDO) explained that civil society organisations can carry out third party monitoring of climate change-related initiatives provided they have the will to undertake this role.

However, the participants of the Roundtable unanimously agreed that NGOs and CSOs in Pakistan currently lack the knowledge, skills and capability to play an effective role in monitoring climate finance spending in the country. Moreover, they reiterated that there is currently no platform in the country that allows for MRV-related information sharing between various stakeholders. They recommended that informative workshops and capacity building events should be organised on a regular basis and information about MRV should be shared in the media to raise awareness among the general public.

The post FEATURE: Climate finance – Monitoring and utilisation in Pakistan’s context appeared first on Climate and Development Knowledge Network.

The Germanwatch Climate Risk Index 2014 has identified Pakistan as the third most vulnerable country to climate change. The impacts of climate change in Pakistan are difficult to deny. Scientists, experts and even the layman can vouch for the increased incidences of climate induced disasters in the country in the last decade. Under the circumstances, adapting to climate change impacts is the need of the hour and developing climate resilient biological and social systems, and infrastructure almost imperative. However, building climate resilient systems in the country is no small feat. Vast sums of money are required for disaster preparedness, disaster risk reduction and for spearheading research for climate change adaptation.

The good news is that money is available for developing countries to meet these adaptation needs. The parties to the United Nations Framework Convention on Climate Change (UNFCCC) have agreed to support developing countries in their efforts to combat climate change by providing financial resources and technical know-how for mitigation and adaptation initiatives. To date, several funding mechanisms have been proposed and made operational under the Convention including the Adaptation Fund, the Least Developed Countries Fund and the Special Climate Change Fund. The Green Climate Fund (GCF) is a comparatively new funding institution, having come into operation in 2014. The UNFCCC conference held in Paris last year confirmed climate finance for developing countries for up to 100 billion USD per year, channeled mostly through the GCF.  The decision of the GCF Board to allocate 50% of the Fund’s resources to adaptation, makes the GCF the largest multilateral funder of climate adaptation activities.

But even though large quantities of climate finance are available, Pakistan has been unable to tap into and access even a small fraction of quantities available. Unarguably, focused and concentrated efforts are required to mobilize and scale up the flow of adaptation finance to the country. Some steps that may be taken to improve Pakistan’s access to climate finance particularly for adaptation initiatives are outlined below.

Identify the needs, priorities and barriers to access finance: The United Nations Development Programme (UNDP) has identified that for any country to be ‘ready’ to access climate finance, the first step is to identify the national priorities for action followed by an assessment of its needs i.e. the volume of finance required to fund these actions. Also important is the identification of existing and possible sources of adaptation finance as well as an assessment of the barriers (such as institutional, regulatory, technical) for accessing both domestic and international finance.

In Pakistan, the Framework for Implementation of Climate Change Policy developed by the Climate Change Division of the government has outlined the strategies and recommended priority adaptive actions in each sector to combat the impacts of climate change. This is a step in the right direction and it is envisaged that this assessment will form the basis of a National Adaptation Program of Action (NAPA) as well as provincial and local adaptation plans.

Develop an investment strategy for climate resilient growth: Without an intelligent, well thought out climate investment strategy, progress on accessing adaptation finance will be severely curtailed. It is important for Pakistan to have a climate smart investment strategy that is in sync with existing national developmental policies and plans. Financial support for developing this strategy can be requested from the GCF as part of its readiness support to countries.

Enhance direct access to climate finance: The variety of options for accessing climate finance has increased over recent years, particularly for public finance from multilateral sources. For direct access, national or sub-national entities need to undergo an accreditation assessment that requires strong fiduciary capacities, compliance with environmental and social safeguards, as well as capacities associated with the roles and functions of an implementing entity. Once accredited, the implementing entity is able to put forward project proposals to funding bodies such as the Adaptation Fund and Green Climate Fund and directly access climate financing.

In Pakistan, there are some international accredited entities such as International Union for Conservation of Nature (IUCN) and UNDP, working on adaptation projects in the country. However, no national entity from Pakistan has so far received accreditation either by the GCF or the Adaptation Fund. Accreditation of organisations both at the national and provincial levels is important to enhance the flows of climate finance to the country.

Establish a climate finance architecture: A study carried out by Vivid Economics in 2013 for the Government of Pakistan explored and identified two models that can potentially leverage international climate finance in Pakistan: setting up a Climate Change Fund or alternatively a Climate Change Facility.

In April this year, a bill for Establishment of a Climate Change Authority was drafted that has proposed the setting up of a Pakistan Climate Change Fund to attract and disburse international climate finance. If this Fund is to access funds from GCF, it will have to apply for accreditation to GCF and meet the required fiduciary and environmental and social safeguards standards.

Develop bankable project pipelines: Accessing finance requires recipient countries to be able to formulate “bankable” project and programme proposals – that is, projects that are sufficiently robust, have appropriate risk management mechanisms, and have a favorable internal rate of return and so are financeable—from local to sector-wide scales. This is particularly important when applying to GCF and Adaptation Fund.

Capability is currently limited in Pakistan to develop this pipeline of bankable projects that not only meet GCF requirements but are also in line with Pakistan’s national development goals, investment strategy and adaptation priorities. Capacity building and training for this is therefore required particularly in institutions that are potential candidates for accreditation.

Engage with the private sector: The major focus of the private sector to date has been on supporting mitigation activities. More recently, there is an emerging market for raising new finance from the private sector for adaptation and large institutional investors suggest that further capital could be raised specifically for adaptation activities, provided the right investment products are available. The Green Climate Fund also has a special Private Sector Facility.

In Pakistan, the agriculture and forestry sector are more suited to the private sector needs, than other adaptation projects, such as infrastructure and coastal protection, which do not typically generate revenue flows. For these and other adaptation initiatives, public-private partnerships can also be explored to draw in funding from the private sector.

Develop de-risking instruments: De-risking or risk transfer instruments help investors reduce or manage investment risks, typically in exchange for a fee, and thus, improve the perceived risk-reward profile of an investment. These may include insurance and guarantee products that protect investors from a borrower’s failure to repay as a result of pre-specified events.

In Pakistan, risk insurance companies can play a significant role in protecting investor interests. In addition, public finance for country risk guarantee schemes could help re-direct private finance for adaptation projects.

Improve capacities to deliver climate finance: Delivering finance refers to the implementation and execution of activities at the regional, national, or local level to ensure that climate finance contributes to effective and transformative actions at the national level.

Pakistan currently needs capacity building at multiple levels to ensure that the adaptation finance is used not just to deliver the project/programme objectives in a timely, effective and transparent manner, but also that they are catalytic in leveraging additional finance particularly from the private sector.

Monitoring, Reporting and Verification (MRV) Systems: MRV systems are needed to monitor adaptation finance i.e. understand which financial resources are flowing where, for what purpose, and how effectively they have contributed towards climate resilience, reducing poverty, and meeting national development priorities.

To summarise, Pakistan needs a strong focus on building and strengthening policy tools, institutional capacities, and technical skills, both at the national and local levels to improve its ability to plan for, access, deliver and monitor climate finance. Only then will it ensure that climate finance is used in an effective and catalytic manner integrated into the overall development priorities of the country.

Picture Courtesy: Abbas Mushtaq, CDKN Asia

The article was first published in The News, Pakistan. 

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Pakistan’s Intended Nationally Determined Contribution (INDC) submitted to the United Nations Framework Convention on Climate Change (UNFCCC) last year was inadequate – to say the least.

The country did not include a single measurable target to reduce its greenhouse gas emissions. This low ambition and non-committal attitude was disappointing from a country that has seen its fair share of climate induced disasters in the last five years: droughts, floods and more recently, intense heatwaves.

Just last year, over 1200 persons died in Karachi while hundreds more were affected when temperatures touched a scorching 48 degrees centigrade. The floods of 2010 are considered the worst of the century and directly affected about 20 million people with a death toll of close to 2,000. Droughts like the one that hit Thar last year have become a more regular feature and impact not only the impoverished population but also agricultural productivity.

Is Pakistan to blame for the increased frequency of these disasters? Many would argue that Pakistan produces less than one percent of the world’s greenhouse gases, and if anything, needs to increase its emissions if it is to meet its developmental goals. Agreed that the country is currently a small emitter in the global scheme of things but does that absolve Pakistan of its responsibility to commit to mitigation targets, particularly when emissions are projected to double in the next twenty years?

The Vision 2025 announced by the government envisages a rapid economic growth trajectory for the country, which will inevitably bring a corresponding increase in emissions. However, it is imperative for Pakistan to commit to reducing its projected greenhouse gases as a responsible nation. Integrating low-carbon and climate compatible policies in all developmental targets is the need of the hour, not just for Pakistan but all countries.

According to Pakistan’s INDC, “…the country will only be able to make specific commitments once reliable data on peak emission levels is available.” The government thereby cited a lack of a credible baseline data on emissions as the reason for not setting mitigation targets. Not surprisingly, this target-free document has been criticised by experts both at home and abroad.

However, all is not lost. Work is underway by a team of national and international experts to develop a reliable baseline for the country: an exercise that should be completed by the middle of this year. This study, commissioned by the Climate & Development Knowledge Network (CDKN), will support the government by providing an updated baseline of greenhouse gas emissions (a task ongoing through 2015-2016) and quantified options to mitigate them. The experts have developed low carbon scenarios that take into account expected trends in the country on indicators such as greenhouse gases, GDP growth, and sectoral changes through to 2030.

The first step in the assessment is the development of sectoral greenhouse gas emissions baselines from 2000 to 2010. Emissions will then be projected out to 2030 to create the reference case, against which abatement potential will be estimated for the six mitigation sectors set out in the UNFCCC: energy, transport, industry, agriculture, forestry and waste. Potential mitigation actions will be reviewed to identity those that offer the greatest opportunity for encouraging emissions reductions, align with the government of Pakistan’s priorities, and result in sustainable development benefits.

In addition to presenting the impacts that low carbon options would have on reducing emissions in Pakistan, the options will also include information on the cost of projects, which Pakistan can use to help identify resourcing needs required through climate finance sources such as the Green Climate Fund (GCF).

Last year, under pressure from the government, the project fast-tracked work on the two sectors, energy and agriculture, to support the development of the INDC. However, the major proportion of project funds is for the development of the greenhouse gas reference case and identification of low carbon mitigation options. Says Phillip Gas, senior researcher energy at the IISD: “The project is not tied to any one national or international engagement, but is designed to be a long-lasting useful resource for the Government of Pakistan.” It is envisaged that Pakistan can use the information generated by this project to inform its future international contributions to climate change whether they are national communications, Biennial Update Reports (BURs), Nationally Appropriate Mitigation Actions (NAMAs) or National Determined Contributions (NDCs).

Here’s hoping that the project outputs will lay the foundation stone for raising the ambition of climate actors in Pakistan, to assist and identify the low carbon and sustainable development priorities for the country.

Picture Courtesy: Abbas Mushtaq, CDKN Asia

The article was first published in The News, Pakistan. 

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