The Paris Agreement is “everyone’s deal”, says Costa Rica’s Christiana Figueres, one of its lead architects. Although national governments negotiated the text, the accord also belongs to cities, civil society, states, businesses, banks and investors.
The UN Climate Change Conference, now underway in Bonn, Germany, will attract roughly 20,000 diplomats, civil society representatives, multilateral development bank officials, business and religious leaders, journalists, ministers and some heads of state.
Country negotiators are meeting to design the Paris Agreement “rule book,” which will guide the agreement’s implementation and to discuss how best to increase the ambition of countries’ national climate change plans prior to 2020.
Running parallel to the conference, hundreds of events will showcase a gamut of solutions ranging from technological advances on renewable energy and electric vehicles to initiatives by cities and states to reduce their emissions and protect tropical forests. These gatherings show how the implementation of the Paris Agreement is underway, with real progress being made to build a low-carbon and climate resilient future. This global action is happening for a variety of reasons.
First, climate change action makes economic sense. Last May, the Organization for Economic Co-operation and Development (OECD) stated that combining climate policies such as carbon pricing with economic policies to boost investment in low-emission, climate-resilient infrastructure could increase GDP by up to 2.8 percent on average across G20 countries (including Argentina, Brazil and Mexico) in 2050.
Second, tackling climate change is about reducing climate risk. Failing to manage this risk could lead to systemic shocks that could have major economic and financial implications. Banks, companies and investors are in favor of measures that report on the physical and transitional risks they face and the steps they are taking to deal with them. Climate change is a threat to investors, and they’re increasingly looking for companies that are willing to address the risk associated with climate change.
Third, Latin American and Caribbean countries are working to rebuild and boost their resilience following the devastating impacts of recent extreme climatic events. From the coastal El Niño which led to floods and mudslides that ravaged parts of Colombia and Peru, to the ongoing hurricane season that has severely affected the Caribbean and Central America, our region is especially vulnerable.
At the Inter-American Development Bank Group (IDBG), we are aligning our activities with the Paris Agreement. Latin America and Caribbean countries back the Paris Agreement because they see it as a way to manage climate risks while supporting cleaner and smarter forms of growth. Twenty-six of the IDBG’s member countries in the region have now ratified the agreement, with many taking impressive steps to implement it.
Last month, Argentina held its second renewable energy auction, RenovAr Ronda 2, which drew offers totaling 9,403 Megawatts, eight times greater than the previous auction. Recently, IDB Invest, the private sector arm of the IDB, signed a $104 million financing package for a wind farm in Buenos Aires province, Argentina and in Mexico signed a $75 million loan to finance the Solem PV project, which will be the largest solar power plant in Latin America.
These impressive levels of investment reflect a broader regional trend. The UN Economic Commission for Latin America and the Caribbean says that for a second year in a row, the renewables sector attracted the most investment, receiving 18 percent of the total investment in the region.
The IDBG is at the forefront of this trend. Research by the British think tank E3G shows that we are a leader among the multilateral development banks with the lowest level of fossil fuel finance as a proportion of our total approvals, and highest proportion of finance going to renewable energy and energy efficiency projects.
In 2016, we financed a total of $2.69 billion in climate-related activities such as loans, grants and technical cooperation, bringing us closer to our goal of 30 percent of total approvals of this kind by 2020. We are making progress, but know that significantly more is needed to fully align financial flows towards low-carbon and resilient development.
Achieving this target will be partially determined by how effectively we can build the necessary institutions and capacity. This must lead to investment strategies that capitalize on new opportunities, whilst limiting any negative impacts on jobs. Greater effort is also needed to accelerate the development of low-carbon and climate-resilient projects and ramping up innovative approaches to overcome high costs.
To address these challenges, the IDBG’s NDC Invest platform is working with governments in Brazil, Chile, Guatemala, Jamaica, and Mexico, to transform their nationally determined contributions into achievable investment plans that can mobilize resources for sustainable infrastructure and landscape investments.
In the wake of this year’s extreme climatic events, ensuring that all our investments are resilient is a priority. We are committed to screening all relevant projects for climate risks by 2018; a process that should lead to an increase in demand for adaptation finance. We are also exploring the potential for conducting a climate stress-test on our portfolio to determine the extent to which it is aligned with the Paris Agreement and its level of exposure to climate risk.
The Paris Agreement does belong to everyone. At the IDBG, we are convinced that its implementation is the best way to manage climate risk and to achieve inclusive sustainable development for the region and its citizens.
Amal-Lee Amin is Chief of the Climate Change Division at the Inter-American Development Bank.