{"id":17575,"date":"2023-09-23T18:13:11","date_gmt":"2023-09-23T12:43:11","guid":{"rendered":"https:\/\/www.nextias.com\/current_affairs\/?p=17575"},"modified":"2023-09-23T18:13:13","modified_gmt":"2023-09-23T12:43:13","slug":"climate-finance-must-get-beyond-greenwishing-greenwashing","status":"publish","type":"post","link":"https:\/\/www.nextias.com\/ca\/editorial-analysis\/23-09-2023\/climate-finance-must-get-beyond-greenwishing-greenwashing","title":{"rendered":"Climate Finance Must get Beyond Greenwishing &#038; Greenwashing"},"content":{"rendered":"\n<p><strong>Syllabus: GS2\/ Government Policies &amp; Interventions<\/strong><strong>; S3\/Conservation<\/strong><\/p>\n\n\n\n<p><strong><span style=\"text-decoration: underline;\">In Context<\/span><\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>We must stop \u2018greenwishing\u2019 and \u2018greenwashing\u2019 and start looking for the instruments that will enable the private sector and private investors to channel more capital toward climate resilience and sustainable development.&nbsp;<\/li>\n<\/ul>\n\n\n\n<p><strong><span style=\"text-decoration: underline;\">What is Greenwashing?<\/span><\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Greenwashing is the process of conveying a false impression or misleading information about how a company\u2019s products are environmentally sound.&nbsp;<\/li>\n\n\n\n<li>Greenwashing involves making an unsubstantiated claim to deceive consumers into believing that a company\u2019s products are environmentally friendly or have a greater positive environmental impact than they actually do.<\/li>\n<\/ul>\n\n\n\n<p><strong><span style=\"text-decoration: underline;\">About Climate Finance\u00a0<\/span><\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Climate finance refers to <strong>local, national or transnational financing<\/strong>\u2014drawn from <strong>public, private and alternative sources of financing<\/strong>\u2014that seeks to support<strong> mitigation and adaptation actions<\/strong> that will address climate change.<\/li>\n\n\n\n<li>The Convention, the <strong>Kyoto Protocol and the Paris Agreement <\/strong>call for <strong>financial assistance <\/strong>from <strong>Parties with more financial resources to those that are less endowed and more vulnerable<\/strong>.<strong>&nbsp;<\/strong><\/li>\n\n\n\n<li><strong>Significance:<\/strong>\n<ul class=\"wp-block-list\">\n<li>It is critical to addressing climate change because<strong> large-scale investments<\/strong> are required to significantly reduce emissions, notably in <strong>sectors that emit large quantities of greenhouse gases<\/strong>.&nbsp;<\/li>\n\n\n\n<li>It is equally important for adaptation, for which significant financial resources will be similarly required to allow societies and economies to <strong>adapt to the adverse effects and reduce the impact<\/strong>s of climate change.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><span style=\"text-decoration: underline;\"><strong>India&#8217;s Position on Climate Finance<\/strong><br><\/span><strong>&#8211; Global Problem: <\/strong>India firmly believes that climate change is a <strong>global collective action problem<\/strong> that can be solved only through international cooperation and multilateralism.<br>&#8211; <strong>Clarity on definition: <\/strong>India also seeks clarity on the <strong>definition of climate finance<\/strong>\u2014the absence of which allows developed countries to greenwash their finances and pass off loans as climate-related aid.<br>&#8211; <strong>Capacity building &amp; technology transfer: <\/strong>India expects action from rich countries in terms of climate finance, technology transfer and strengthening the capacity of poor and developing countries to combat climate change.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p><strong><span style=\"text-decoration: underline;\">Challenges<\/span><\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Unachieved goals: The UNFCCC Standing Committee on Finance (SCF) <\/strong>released a report on the progress made by developed countries towards achieving the goal of mobilising $100 billion per year.\n<ul class=\"wp-block-list\">\n<li>According to the report, it is widely accepted that\n<ul class=\"wp-block-list\">\n<li>The <strong>$100 billion goal has not been achieved in 2020<\/strong>, and&nbsp;<\/li>\n\n\n\n<li>An earlier effort <strong>to mobilise private finance by the developed countries <\/strong>has met with comprehensive <strong>failure<\/strong>.&nbsp;<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Private climate finance: The OECD 2020 data<\/strong> shows that the mobilisation of private climate finance has<strong> underperformed against the expectations of developed countries<\/strong>.\n<ul class=\"wp-block-list\">\n<li>Many investors associate climate-centric investments with \u2018social impact\u2019 and reduced profitability.&nbsp;<\/li>\n\n\n\n<li>While sophisticated investors have the means to deploy their capital profitably toward decarbonization, the energy transition and other climate-related sectors, such investments tend to be illiquid.&nbsp;<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Demands of developing countries: <\/strong>Developing countries have for a long time insisted that a significant portion of climate finance <strong>should come from public funds<\/strong> as <strong>private finance will not address their needs<\/strong><strong>and priorities <\/strong>especially related to <strong>adaptation<\/strong>.\n<ul class=\"wp-block-list\">\n<li>Climate finance already remains skewed towards mitigation and flows towards bankable projects with clear revenue streams.&nbsp;<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Contradictory claims: <\/strong>Many <strong>developed countries and multilateral development banks <\/strong>have emphasised the <strong>importance of private finance <\/strong>mobilised in their<strong> climate finance strategies<\/strong>, including by<strong> de-risking<\/strong> and creating enabling environments.\n<ul class=\"wp-block-list\">\n<li>According to the reports, these efforts have <strong>not yielded results at the scale required <\/strong>to tap into the significant potential for investments by the private sector and <strong>deliver on developed countries&#8217; climate ambition<\/strong>.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<p><strong><span style=\"text-decoration: underline;\">Suggestions<\/span><\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Need of significant private-sector resources: <\/strong>While the public sector has an important role to play in climate financing, scalable solutions<strong> require significant commitments of private-sector resources<\/strong>.\n<ul class=\"wp-block-list\">\n<li><strong>CoP-28<\/strong> offers an opportunity to rethink how we deliver such <strong>market solutions,<\/strong> and how we can harness<strong> digital innovation<\/strong> to scale up promising models.&nbsp;<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Mobilising capital: <\/strong>The solution is to create climate investments that are <strong>profitable, liquid and accessible to al<\/strong>l.\n<ul class=\"wp-block-list\">\n<li>To mobilize capital at scale, we must draw on the global savings of individual investors as well as institutions such as pension funds, insurers, and sovereign funds.&nbsp;<\/li>\n\n\n\n<li>Risk diversification can be achieved through retail-friendly, liquid, easily accessible instruments such as exchange-traded funds (ETFs).<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Climate-resilient real estate and infrastructure: <\/strong>This comprises assets in weather-proof, stable geographies that have low climate exposure.\n<ul class=\"wp-block-list\">\n<li>Real-estate and infrastructure valuations in such regions are poised to appreciate significantly on the back of population shifts from high-risk areas across the Southern Hemisphere to more resilient communities in North America, Northern Eurasia, and select geographies in the Global South.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Seeking for reliable returns: <\/strong>Carefully selected Real Estate Investment Trusts (REITs) and exposure to greenfield developments through ETFs are two ways to secure reliable returns from climate-adaptation efforts.\n<ul class=\"wp-block-list\">\n<li>And as an added bonus, such investments offer broader economic and societal benefits, including productivity growth, job creation and the provision of employment and housing for migrating populations.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Green commodities: <\/strong>An <strong>orderly transition<\/strong> to a <strong>more resilient future <\/strong>requires massive investments not only in <strong>energy, food and water assets,<\/strong> but also in the <strong>metals and critical minerals<\/strong> used in renewable energy and electric vehicles (EVs).\n<ul class=\"wp-block-list\">\n<li>These include commodities such as soy, wheat, copper, rare-earth elements, cobalt, lithium, and so forth.&nbsp;<\/li>\n\n\n\n<li>To <strong>avoid any \u2018greenflation\u2019<\/strong> (inflation caused by decarbonization efforts) and supply bottlenecks, we urgently need to boost production and lower the cost of securing these commodities.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Climate-aligned portfolio: <\/strong>A climate-aligned portfolio should include assets that provide a hedge against inflation and geo-economic risks, such as short-term and inflation-indexed sovereign bonds and gold.\n<ul class=\"wp-block-list\">\n<li>Greater investments in inflation-proof sovereign assets will allow governments to do more to finance the green transition.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<p><strong><span style=\"text-decoration: underline;\">Way Ahead<\/span><\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>To build climate-resilient communities, encourage cross-border public-private partnerships, secure critical green supplies and accommodate climate-driven population shifts around the world.<\/li>\n\n\n\n<li>With climate-driven costs escalating rapidly, innovation (both technological and financial) remains the most powerful tool at our disposal.&nbsp;<\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><span style=\"text-decoration: underline;\"><strong>Daily Mains Question<\/strong><br><\/span><strong>[Q] <\/strong>With climate change already wreaking havoc on poor and rich countries alike, unlocking this largely untapped pool of capital has become an urgent priority. Analyse.<\/td><\/tr><\/tbody><\/table><\/figure>\n","protected":false},"excerpt":{"rendered":"<p>Syllabus: GS2\/ Government Policies &amp; Interventions; S3\/Conservation In Context What is Greenwashing? About Climate Finance\u00a0 India&#8217;s Position on Climate Finance&#8211; Global Problem: India firmly believes that climate change is a global collective action problem that can be solved only through international cooperation and multilateralism.&#8211; Clarity on definition: India also seeks clarity on the definition of [&hellip;]<\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[22],"tags":[],"class_list":["post-17575","post","type-post","status-publish","format-standard","hentry","category-editorial-analysis"],"acf":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/17575","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/comments?post=17575"}],"version-history":[{"count":1,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/17575\/revisions"}],"predecessor-version":[{"id":17576,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/17575\/revisions\/17576"}],"wp:attachment":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media?parent=17575"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/categories?post=17575"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/tags?post=17575"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}