Finance - the missing piece in green growth puzzle: Achim Steiner

He believes that the global community needs to get the finance sector on board as it is where the money flows to that will determine if the global economy can respond to the sustainability challenge.

Noting that the cost of adapting to climate change could “place a crippling burden on the world economy”, Steiner emphasises that even though governments have pledged more than US$10 billion of finance to help developing countries cope with climate change, more than ten times this amount will be required in the next five years.

In fact, UNEP estimates that up to US$6 trillion a year is needed till 2030 for countries to improve their energy, transport, water, and urban infrastructure. This is why it has made designing greener financial systems a priority. 

The agency launched an initiative called the Inquiry into the Design of a Sustainable Financial System last year and will work with policymakers and businesses to advance a green financial system in the coming years. Already, there are encouraging signs: The recent growth in green bonds markets is one example, notes the UN leader who has helmed the agency for close to a decade. 

Steiner, who has German and Brazilian citizenship, has dedicated the bulk of his career to environmental causes: Prior to his appointment as UNEP executive director in 2006, Steiner led the International Union for Conservation of Nature (IUCN) from 2001 to 2006, and the World Commission on Dams before that.

As we look back on the year, what do you think were the biggest headlines that had a significant impact on business and sustainability?

The first ever UN Environment Assembly convened in Nairobi in June, and was attended by delegations from 160 countries as well as high-level participants from government, business, and civil society. This collective meeting, which agreed on 16 decisions that encourage international action on major environmental issues ranging from air pollution and the illegal trade in wildlife, to plastic debris in the oceans, chemicals and waste, was an important milestone in UNEP’s 43-year history.

This year, a draft set of Sustainable Development Goals - which will drive the future of development in coming decades - was also agreed in New York in June. The final version of the text is now being negotiated.

We also saw the concept of an inclusive green economy maturing in both industrialised and emerging economies. In the field of renewable energy, for example, South Africa, which adopted a green energy policy three years ago, has just raised US$14 billion for investments in wind and solar energy. Kenya is also channelling 90 per cent of its investment in upgrading its electricity infrastructure into renewable energy generation facilities.

The financial sector is also beginning to recognise the importance of sustainable development, as evidenced by the increase in the issue of green bonds this year. The value of bonds issued in the period January to October 2014 rose to US$32 billion, compared to US$11 billion for the whole of 2013.

What do you think are the key themes that will dominate the corporate agenda as we go into 2015?

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At the same time, many corporations are increasingly looking at the issue of climate change as one that will affect their business. In the financial sector, for example, investors are paying close attention to the developments in energy to guide their investment into energy sources and infrastructure.

Businesses will still be plagued by economic uncertainty, thanks to a global economy that remains vulnerable and unpredictable. At the same time, many corporations are increasingly looking at the issue of climate change as one that will affect their business. In the financial sector, for example, investors are paying close attention to the developments in energy to guide their investment into energy sources and infrastructure.

I believe that global sustainability efforts should focus on the financial world because investment decisions will impact how well economies can respond to global challenges.

Pledges by large corporations on sustainability issues such as deforestation and energy use will have implications for small and medium enterprises, which will need to evolve more efficient production techniques and technologies.

This will require significant investment. Governments must put in place the right policies and incentives – and where necessary, financing or subsidies – to allow SMEs to perform well in a more resource-constrained and consumer-sensitive economy.

What is your outlook on the progress of sustainable development specifically in Asia?

We are seeing a far greater awareness in Asia of the link between health and pollution. The link between economic progress, pollution, and sustainability is also one that will gain more attention.

Climate change is driving an expansion of renewable energy in Asia, and the increased demand will make renewables more economically viable – this is being seen in the shortages of solar technology, and growing investment in the sector in Asia.

It remains to be seen if this rapidly developing and urbanising continent can transition away from fossil fuel-based infrastructure towards a clean energy economy, or from private cars to a culture of low-carbon public transport. The type of infrastructure that receives investment in Asia will be important, as this will affect companies and economies for years to come.

I am cautiously optimistic about how Asia will fare on sustainability in the long term. There are positive examples of sustainable development being implemented across the region, but the pace of transition is still too slow in most economies to effectively contain the negative impact of climate change.

Speeding this up boils down to economic policy. Global fossil fuel subsidies, for example, amount to about US$700 billion a year – such significant subsidies inevitably drive investments in carbon-intensive energy. Therefore, economic policy must support sustainable investing and infrastructure development.

What are your hopes for the coming year as we approach the December deadline for a global agreement on climate change in Paris?

In Lima, virtually all countries recognised the need for a global framework for climate action. But the negotiations also demonstrated that the issue of different obligations between developing and industrialised economies is difficult to resolve.

What is needed now is strong political leadership that can frame a broad agreement on how developing and developed nations can work together to mitigate climate change. This, along with corporations supporting the goal of a deal in Paris, will be a critical necessity over the next eleven months, so that a successful agreement can be reached.

I hope we will see more of the proactive political leadership that resulted in the US-China deal and EU emissions reduction pledge, so that in Paris, we will not be negotiating partial elements of an agreement, but a unified framework for climate policy.

What will you and your organisation be working on this year?

We are spending much time with leaders from the economic and corporate sphere to demonstrate that it is important to act on climate change, but there are also many opportunities in doing so.

We are focusing on the post-2015  sustainable development goals. We see the universal objectives as an essential set of guiding posts for both industrialised and developing countries. We are also conducting a study into the design of sustainable financial systems, which will examine how central banks and regulatory authorities can facilitate a transition towards more sustainable economies. A report of our findings will be published at the end of the year.

In addition, we are significantly expanding our work in the field of wildlife protection at the request of governments struggling with the illegal wildlife trade, which is worth US$213 billion a year. We will work with the United Nations Office on Drugs and Crime and signatories to the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) to help governments strengthen national legislation on this issue, and raise public awareness to reduce consumer demand for illegal wildlife products.

This interview is part of the “15 on 15” series by Eco-Business where we interview 15 global and Asian leaders on their thoughts on the year ahead. Read all the interviews in the latest issue of the Eco-Business magazine here.