Remarks by Gabriela Ramos on the second day of the OECD Forum on Green Finance and Investment hosted at the OECD Headquarters in Paris, France on 30 October 2019.
Good morning Ladies and Gentlemen,
Welcome to the second day of the 6th OECD Forum on Green Finance and Investment.
Yesterday, Secretary-General Gurría opened this Forum with a call to action that highlighted not just the scale of the climate emergency, but also the importance of tackling it with policies that also promote inclusion and well-being.
We have seen here in France, but also more recently in Chile, that we have to put people at the centre of all of our policy efforts, including those that are linked to reducing our dependence on fossil fuels and incentivising green growth.
The OECD has made this a priority in the last few years with groundbreaking studies like Investing in Climate, Investing in Growth, and most recently Accelerating Climate Action: Refocusing Policies Through a Well-Being Lens. There is a clear empirical case: policies that work for climate and people, also work for growth.
OECD research undertaken at the request of the German Presidency of the G20 showed that climate-compatible policy packages could increase long-run output by up to 2.8% on average across the G20 by 2050.
Financing is an important part of getting this policy mix right, and not just how we mobilize more climate finance but also how we mobilize it more effectively. We have the power to do more with our investments.
Let me begin with engaging emerging economies, which is a key area for discussion today, and in particular India and ASEAN countries.
India has set ambitious targets of installing 175 GW of renewables capacity by 2022 and 500GW by 2030. Achieving India’s clean energy goals will require around USD 500-700 billion in investment in the coming decades.
Similarly, ASEAN has set a target of sourcing 23% of its energy from renewable sources by 2025. As a region, ASEAN’s clean energy goal requires USD 290 billion in investment through 2025.
While progress has been made in financing renewables and energy efficiency infrastructure in India and the ASEAN, an investment gap remains. Governments cannot shoulder this burden alone. Catalysing private investment requires an enabling investment environment and a pipeline of investment-grade projects.
Thus, the OECD’s new Clean Energy Finance and Investment Mobilisation Programme, which you will discuss today, aims to support selected emerging economies in Latin America, South and Southeast Asia strengthen their clean energy policies to attract private investment for through clean energy finance reviews, policy development, investor dialogues and regional peer learning.
As these economies continue to grow, we must ensure that any increase in consumption is matched with a supply from renewable or other low carbon sources, rather than adding to the global demand for fossil fuels. This goal, alongside efforts to promote energy efficiency and energy conservation can significantly advance our progress toward a low-carbon global economy.
We are looking forward to hearing your insights, experiences and ideas on taking this forward.
Linked to this agenda is another key challenge you will be addressing today: biodiversity loss. At the request of the French G7 Presidency, we recently published a new report Biodiversity: Finance and the Economic and Business Case for Action. The picture is worrying, and a lack of sufficient financing and ambitious action is at the heart of the problem.
The OECD estimates that finance flows with the potential to harm biodiversity stand at 500 billion US Dollars per year, ten times larger than global finance flows for biodiversity conservation and sustainable use.[i]
Over the last half century, such toxic finance flows, and the interests that drive them, have helped destroy one tenth of the world’s terrestrial biodiversity and one third of freshwater biodiversity. We are on course to lose another 10% of terrestrial species by 2050.[ii]
And yet protecting biodiversity is not just about surviving, it also about thriving. Ecosystem services delivered by biodiversity, such as crop pollination, water purification, flood protection and carbon sequestration are worth an estimated USD 125-140 trillion per year, more than one and a half times the size of global GDP.
The OECD has identified key priorities to help scale up and align finance for biodiversity from all sources, public and private. For example, we need a global framework to coordinate action; remove harmful subsidies; consistent and comparable finance tracking and reporting frameworks across countries and companies. Last but not least, we need multi-stakeholder engagement to ensure a common approach for measuring and integrating biodiversity in business and investment decisions.
Key to addressing biodiversity is managing rapid urbanisation, which is also on our agenda today.
By 2050, almost 70% of the world’s population is expected to be living in urban areas.[iii] This is already bringing important environmental impacts, when you consider that cities are responsible for two thirds of energy consumption and for 70 percent of global emissions.[iv]
Cities are core for climate action, and many are actually taking the lead. Recent OECD evidence has shown that cities and regions are responsible for 64% of public investment and half of public spending in selected sectors that have a direct implication for climate change.[v]
However, action to date has been far short of the mark. Subnational climate-related spending represented just 1.3% of GDP on average over 2000-2016, while subnational climate-related investment represented around 0.4% of GDP. Public funding will not be sufficient to finance sustainable cities. We must mobilize the private sector to help finance this investment deficit. Today, you will get a chance to discuss the innovative financial instruments available for cities such as green bonds, equity funds, and land-value-capture instruments to outline concrete actions and recommendations to unlock private investment.
As you can see, the question at hand at this forum is not just how we mobilize more finance to fill key investments gaps to climate mitigation and adaptation efforts. We must go a step further, thinking critically about where and how we direct these finance flows towards strategic synergies that accelerate progress towards a low carbon future, and benefit people and planet.
Thank you and enjoy day two of the
[i] based on fossil-fuel subsidies and government support to agriculture that is potentially environmentally harmful
[v] The average of 30 OECD countries over the period 2000-2016. Financing Climate Futures. Rethinking Infrastructure. Case study on Financing climate objectives in cities and regions to deliver sustainable and inclusive growth