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Donors must do more to align development finance with climate goals

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Donor countries must do more to bring development finance in line with climate goals, raising the share used for climate action and reducing to zero the amount that supports new fossil fuel activities, according to a new OECD report.

Aligning Development Co-operation and Climate Action: The Only Way Forward finds that only 20% of development finance provided each year by members of the OECD Development Assistance Committee (DAC) over 2013-17 included a focus on climate change. For multilateral providers such as U.N. agencies and international development banks, 40% of finance included a climate focus. Overall, while development finance used for renewables and energy efficiency is rising, this continues to be undermined by the financing of new fossil fuel-based energy.

“It is encouraging to see donors moving in the right direction to bring development finance in line with climate goals, but we must not rest until we have zero aid going to fossil fuels and more going to tackle climate change,” said OECD Secretary-General Angel Gurría. “Given the climate emergency we are facing, and the fact developing countries will suffer some of the greatest impacts, there is simply no excuse for using foreign aid to subsidise fossil fuels.”

The report looks at both concessional (grants and loans on generous terms) and non-concessional development finance from DAC-members, non-DAC members and multilateral providers.

It finds that globally, countries have roughly doubled flows of development finance going to support renewable energy since the 2015 Paris Agreement, from an average of USD 5.6 billion per year in 2014-15 to USD 12.2 billion per year in 2016-17.

Yet in 2016 and 2017, an annual average of USD 3.9 billion – 1.4% of total development finance of USD 283 billion – was used for fossil fuel activities. Of that amount, 23% was bilateral aid from DAC members. Almost all of the remaining 77% was development finance from multilateral providers.

Momentum is growing as more bilateral and multilateral providers commit to aligning development flows with the Paris Agreement. A number of multilateral providers are reducing financing for coal-fired power generation and making further commitments to steer more finance away from fossil fuels. For example, the European Investment Bank Group (EIB) recently committed to align all financing activities with Paris Agreement goals by 2020 and stop financing fossil fuel energy projects from the end of 2021. A survey of aid providers carried out for the report found that a third of respondents have exclusion lists for fossil fuel intensive activities.

Yet progress is not happening quickly enough, and many donors still lack mandates, resources, incentives and strategies to ensure they are factoring in climate change. In addition to development flows, export credits are a major public instrument for trade promotion that undermine climate goals. According to an analysis of OECD countries that have reported data, 58% of official export credits that support energy production benefit fossil fuel technologies.

Aid activities that are inconsistent with the Paris Agreement, such as financing infrastructure or economic activities that are high-emitting and not climate resilient, risk locking countries into development pathways that will exacerbate and increase vulnerability to climate change. These risks create stranded assets and debt distress, making it harder to achieve the 2030 Sustainable Development Goals. Low-emissions, climate-resilient pathways are the only sound option for achieving sustainable energy access and poverty reduction goals.

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Technology can help track choices to balance nutrition and climate impact

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Like the popular fitness apps, which help users track their exercise activities, food intake and more, an app called Evocco aims to give consumers information about their shopping habits to help cut their carbon footprint by estimating the climate impact of their choices.

By taking a photograph of food receipts, shoppers can check their score which combines the climate impact of the food they’ve bought with their nutritional value, helping customers get the most nutritious food for the lowest climate impact.

“We see food as the first step in somebody’s climate action journey,” said Hugh Weldon, Evocco co-founder and Young Champion of the Earth for Europe 2018. “With this tool, we aim to make it easier for people to join the climate movement.”

At the start of the year as a Young Champion, Evocco had completed its first alpha tests with users of the Android smartphone app. The company was a team of five. Then, the design was overhauled based on feedback from testers, and the team refocused for a public release originally slated for January 2019.

“The year has been one of many lessons for Evocco,” said Weldon. “Technology challenges and changes in the team saw the launch of the app delayed. Targets had to be reconsidered, and the team had to be restructured.”

Yet despite challenges, Evocco’s Weldon was named on many of Ireland’s hottest upcoming talent lists and honored in the Ten Outstanding Young Persons awards. Weldon and the Evocco team presented at climate change conferences in New York, Xiamen, Nairobi, Stockholm, Estoril, and at a climate youth festival in Dax.

“These opportunities have resulted in huge personal growth for me and have boosted the credibility of Evocco immensely,” said Weldon. “There have also been further opportunities that we simply did not have the capacity to take.

There have been serious challenges this year, too.

“The effects have been a real setback but we have learned some important lessons. With few resources, we have had to find other ways to launch our technology and use our data to the best advantage. In the end, the challenges we have faced have forced us to become more resourceful and to find low-tech solutions. It’s been a huge challenge, but we’re really excited to be almost there.”

In April 2019, Evocco launched Tracker in Ireland, allowing shoppers to upload their food receipts and receive an email star rating for their basket, with tips to improve. Then in May, Ursula Clarke joined as Head of Software Development, Evocco’s first senior tech hire and a huge boost to the team.

“Over the course of the year, our business plan has evolved greatly, and in addition to our consumer app, we are excited to launch a corporate product in January. This allows employees to compete against each other on sustainability, and has sparked some great interest,” said Weldon.

With the first cohort of users in Ireland already enjoying the benefits of the Evocco app, the focus is now to grow user numbers and secure investment from angels and venture capitalists.

Clementine OConnor, sustainable food systems expert at the United Nations Environment Programme, said: “Food systems generate around 30 per cent of greenhouse gas emissions. Shifting to healthy sustainable diets is one of the most powerful things individuals can do to reduce their climate impact, while improving their own health and well-being. “Evocco’s app provides a really practical tool to help consumers understand the impact of their food purchases and make small changes to make their diet more sustainable.”

UN Environment

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Fifteen Years to Save the Amazon Rainforest from Becoming Savannah

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The pace of deforestation in the Amazon, coupled with last year’s devastating forest fires, has pushed the world’s largest rainforest close to a tipping point beyond which it will turn from a carbon sink to a carbon source.

Without immediate action to halt deforestation and start replacing lost trees, half of the entire Amazon rainforest could become savannah within 15 years, according to Carlos Afonso Nobre, Director of Research at the Brazilian Academy of Sciences. The Amazon’s tropical forests create 20%-30% of their own rainfall, so preserving them is as vital for regional weather systems and food production as it is for stabilizing the global climate. “Deforestation is now at 17%,” said Nobre, “but if it exceeds 25%, we will cross the tipping point.”

Colombia has stepped up to the challenge, setting targets to plant 180 million trees and reduce deforestation by 30% by 2022. President Ivan Duque told a packed hall that “the greatest challenge of our time is climate change”. In September 2019 he convened the Leticia Pact of seven Amazon countries whose presidents have personally committed to work together to protect the rainforest.

“We have to defeat deforestation,” said the president, whose country is 35% rainforest. He has also launched a strategy of Biodiverse Cities, in which Colombian cities within forest areas will develop circular economies to protect biodiversity and the environment. “Thirty-four million people live in the Amazon,” said Duque, adding: “We need those societies to be able to preserve themselves and preserve forest ecosystems.”

Al Gore, Vice-President of the United States (1993-2001); and Chairman and Co-Founder, Generation Investment Management, agreed that indigenous people and their knowledge must be respected. For centuries, people have made a way of life in the Amazon that is not destructive. While poverty in the region needs answers, Gore said that clearing the rainforest to plant crops is a “false hope” as the richness of the rainforest is in the canopy and its wildlife, not in its thin soils.

Nobre has developed the idea of an Amazon Third Way in which modern technology taps into and develops traditional wisdom to create a new bioeconomy. The acai berry, for example, brings over $1 billion into the Amazon economy. It is second only to beef in terms of value yet uses just 5% of the area taken by up cattle ranches – making the berry 10 times more profitable than the beef.

Solutions need to be global as well as local. Nobre called on assembled business leaders to support global supply chains that are deforestation-free and to promote the emergence of a new bioeconomy.

Emphasizing the sense of urgency, Gore declared that “the climate crisis is way worse than people generally realize and it’s getting worse way faster than any of us realize”. He called on politicians in particular to rise to the challenge: “This is Agincourt, this is Dunkirk, this is 9/11,” he announced with passion.

Fellow panellist Jane Goodall, famous for her work with chimpanzees and community development across Africa, called on all of us to get involved in the World Economic Forum’s 1 Trillion Trees Initiative. She said we need ways of compensating people for looking after tropical rainforests on our behalf, as currently we are not paying for forests despite needing them everywhere. She cautioned people against making the tone of the debate too “doom and gloom” and left the hall with this message: “Give the youth hope, because if you lose hope, you give up.”

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Greenpeace Challenges Banks over $1.4 Trillion Invested in Fossil Fuels since Paris Agreement

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Since the groundbreaking Paris summit on climate change in 2015, 24 global banks have invested $1.4 trillion in the fossil fuel industry, according to Jennifer Morgan, Executive Director of Greenpeace International. Greenpeace’s report, It’s the Finance Sector, Stupid, published today, puts the blame for the climate emergency at the feet of the banks, insurers and pension funds that participate in Davos. The report adds that $1 trillion could buy 640GW of solar power, more than the current global capacity.

However, financiers on the panel, tasked with solving the “green growth equation”, argued that the international financial system is fundamentally reshaping itself around how to transition to a net-zero economy. They are responding to the demands of their clients as well as directly feeling the heat through, for example, having to reprice the cost of insurance risk.

Mark Carney, Governor of the Bank of England, said: “With major investors, the question is: what is your plan to get to net zero?” Two-thirds of questions at bank AGMs are now around these issues, he said, adding: “Everyone knows they need a plan.” Carney acknowledged Greta Thunberg’s reference at the Annual Meeting today that on our current emissions trajectory we will – in a little over eight years – most probably breach the limit required to restrict global warming to 1.5C. He called for a credible trajectory towards a green transition, based on an agreed timeframe and common metrics. This, along with public pressure and government policy, will determine where capital flows, he said

Governments are lagging behind. We are in the midst of the largest civil society protests since the Iraq and Vietnam wars, Morgan said, but “it’s actually the politics that’s holding us back on this”. She called on government leaders to take courage, sit down with experts, civil society and innovators, and put together what we know needs to be done. Carney pointed to November’s COP26 meeting in Glasgow as the opportunity to get private actors and regulators together to ensure that climate change is taken into account in every financial decision.

Speaking as a member of the board of directors for Saudi Aramco, Andrew N. Liveris agreed that governments have been slow and called for businesses to “get very serious on the financial side of KPIs”. Outcomes will only emerge if we hold people accountable to the right KPIs, he said, adding that COP26 is an opportunity to develop metrics that business will respond to.

However, governments also need to get their own houses in order, said Mariana Mazzucato, Professor of Economics of Innovation and Public Value; and Founder and Director, Institute for Innovation and Public Purpose, of University College London. Currently, governments steer three times more subsidies towards fossil fuels than towards climate solutions. The UK’s Department of Transport has a £30 billion procurement budget that is focused more on cost efficiencies than transitioning to a zero-carbon economy, she said. The German government, by contrast, has made public procurement conditional on sectors, such as the steel industry, transforming themselves. Mazzucato asked how genuine the claimed transformation of the finance sector really is. “Currently there is lots of talk, but all the walk is going in the wrong direction,” she said. What will really cause change is the way we govern businesses, she said, asking: “Why don’t we have a financial transaction tax?”

Panellists all agreed on one key issue – 2050 is far too late to achieve a net-zero economy. “We cannot get to 2030 and still have this conversation”, said Liveris.

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