COP22: Nordic experience useful in mobilising climate finance

“As long as the financing sector is not capable of transforming the climate risk into a financial risk, things will not happen”, says Mikko Halonen from Gaia Consulting in the Nordic pavilion on the side-lines of the 22nd UN Climate Summit (COP22) in Marrakech, Morocco.

The Paris Agreement came into force in November 2016 and confirms the commitment of developed countries to mobilise USD 100 billion annually until 2025 to combat climate change and thereafter to increase financing to support mitigation and adaptation in developing countries.

Mikko Halonen gave a presentation at COP22 about the preliminary findings of an ongoing study that he is leading on mobilising climate financing.

The study was commissioned by the Nordic Council of Ministers’ Nordic Working Group for Global Climate Negotiations (NOAK) in collaboration with the NewClimate Institute and the Stockholm Environment Institute.

The purpose of the investigation is to highlight how the Nordic countries are contributing to climate goals, as well as how governments, together with public and private sector actors, could help to make wider finance flows more climate-compatible.

The study began in June 2016, and the final report is scheduled to be submitted in January 2017.

What are the preliminary findings of the study?

“The process is ongoing, but we can already see that the Nordic countries are important contributors to climate-related ODA [official development assistance]. The way the Nordics work can also be quite useful in mobilising climate finance. The Nordic countries are trusted partners, experienced in certain technologies and instruments that can help mobilise private finance.”

How could these strengths and activity be scalable?

“All countries are struggling with scaling up, and we are all learning about it. Work done, for instance, by the Nordic Investment Bank regarding issuing and buying green bonds is definitely scalable, as is the work done by Nordic development finance institutions in the energy sectors. In particular, I would like to mention how the Danish Climate Investment Fund has managed to mobilise pension funds. That is extremely interesting, and it should even be scalable to a global level.”

This is a complex study. What are the major challenges, issues and concerns?

“It is first of all a question of raising awareness. Within the financial community, we need to raise awareness about what the finance problem truly is. As long as the financing sector is not capable of transforming the climate risk into a financial risk, things will not happen. Regarding traditional ODA, we need to learn how to engage the private sector, because grant-based ODA cannot provide renewable energy infrastructure investments at the scale required, or help build the needed resilience at the pace and scale needed. So, we need partnerships with the public and private sectors.”

How should we go about doing that in practice?

“Step by step, meaning that tomorrow, NIB should continue its contributions to the green bond market, and maybe look to learn from and contribute to adaptation benefits. For the ODA community in the Nordic countries and internationally, this means making a stronger effort to understand what it takes to collaborate successfully and sustainably with the business sector. For pension funds, it means looking in the mirror and asking whose money they are truly investing. They should be patient investors and think about how to become drivers of a climate-compatible future for the generations to come, and not only dwell on how to reduce the climate risk in their portfolios.”

On 30 November, the Nordic Council of Ministers is arranging a workshop on climate finance, hosted by the Nordic Investment Bank in Helsinki. What are your expectations?

“We will be discussing exactly these critical issues. Our goal is to identify solutions with Nordic added value and to raise awareness about these solutions. It will also be about building commitment and taking concrete action.”