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  • Funds to repair climate and biodiversity inadequate: Prodipto Ghosh, former Environment Secretary of India.

    Published on June 7, 2023

     New Delhi : “Clearly there is an inadequacy of funds to deal with the salvaging of climate and biodiversity losses”, said Prodipto Ghosh, former Environment Secretary of India. “We definitely need to think of creating innovative finance solutions to create the backbone of the recovery regime”.

    Dr Ghosh was moderating an international webinar on Innovative Finance Solutions for Climate and the Planet on the 50th anniversary of World Environment Day on 5ht June organised by CUTS International, a global public policy research and advocacy group, in its campaign to seek solutions to the humongous funding problems of salvaging the earth.

    The combined climate flows of traditional sources of finance, including contributions by multilateral financial institutions, stand at roughly US$100bn per year, which represents a tiny proportion of the actual global requirements. Most scholars agree that the required funding is of the order of $7tn. Moreover, only a small portion of this sum is given in the form of concessional finance.

    Otaviano Canuto, a Non-Resident Senior Fellow at the Brookings Institution and formerly Vice President of the World Bank mentioned how the multilateral financial architecture is constrained by global disruptions, over the last few years.

    Globally disruptive events over the last few years have led to a growth crisis, reduced fiscal buffer, impaired pursuit of Sustainable Development Goals (SDGs) as well as climate and biodiversity targets.

    Developing countries have been disproportionately impacted because of these disruptions. A big and sustained push on Sustainable Development in developing countries is urgently needed, to unlock a new growth story.

    The global multilateral financial architecture today is dealing with a ‘double challenge’,i.e., supporting the unfinished development agenda as well as earmarking funds for fresh global priorities, including on climate and biodiversity.

    It becomes extremely challenging to deal with these crises at a time when capacities of the global multilateral financial architecture to respond to crises have been utilised to the maximum.

    Therefore, utilisation of innovative finance must be focused on amplifying the capacity of the global architecture to face this double challenge.

    According toCanuto, a study conducted by the Brookings Institution showed that the world will need $5.9tn in investments by 2030, compared to flows of $2.4tn from 2019.

    Nearly half of this finance will be required for climate finance requirements, while the other half will be required for fulfillment of targets under other Sustainable Development Goals (SDGs).

    Galit Palzur, Risk Strategist and an Expert on Risk Management of Disasters, Climate Change and Extreme Events, Israel said how utilisation of blended finance instruments could be optimized to generate environmental finance.

    Blended Finance helps prospective private investors utilise public funds, building on an optimal risk sharing model towards meeting environmental targets. It is particularly important for de-risking projects, which carry risks at the inception stage.

    Chaitnanya Kommukuri, Senior Vice President, Kotak Mahindra Bank, Head-ESG, mentioned how the private sector’s contributions should be analysed from multiple perspectives.

    “When we analyse contributions of the private sector in the sphere of environmental finance, we must note the variety of measures which are implemented by the sector, including technological development, community led programmes. Interventions such as setting up incubation centers to support innovative solutions is one way of channelising climate flows”, said Kommukuri.

    Nyanyiwe Sulu, a Tax Administrator with the Malawi Revenue Authority apprised the participants of some of the specific concerns faced by Least Developed Countries in Africa.

    While contemplating utilisation of instruments like a Financial Transactions Tax (FTT) in Least Developed Countries (LDCs), it is important to identify countries which are inclined to support such measures and build a movement from thereon.

    “The expertise of existing international organizations like the United Nations must be utilised to identify the unique needs of LDCs before a plan of innovative finance solutions is drawn up”, said Sulu.

    “A global ecosystem must also be created which encourages African countries and organisations to implement green bonds in the continent, which can be specifically created for environment friendly projects and sustainable initiatives.

    “Other solutions could include contributions from the national budgets as well as the private sector. But it must be ensured that contributions for specific purposes are actually utilised for these goals. For instance, Malawi has a carbon tax, but whether it is utilised for the said activities is not certain”.

    Sanjay Vashishtha, the CEO of First Green Consulting Private Ltd. provided insights about how the carbon markets ecosystem needs to be made more transparent in India.

    The carbon markets ecosystem in India is opaque and riddled with uncertainty on issues such as pricing. Despite considerable potential India, at this stage is not able to tap more than 20% of the projects which can attract carbon finance.

    “Even though non-government actors have made notable investments in climate change mitigation activities, these activities have not attracted adequate international investments on account of uncertainties about returns” said Vashishtha.

    “The market is not well defined, data is not transparent, market mechanisms are not aligned with a common framework. Also, the rates of carbon credits vary across many countries. India could utilise its G20 presidency to push for common carbon pricing across developed and developing countries to address this inconsistency”.

    ‘We look forward to developing a campaign creating an adequate fund of funds to support global action to curb the harm of climate change and biodiversity losses, so that the human race can salvage its future and achieve SDGs” said Pradeep S. Mehta, Secretary General, CUTS International while thanking all the participants in the webinar.

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