Grynspan: Leveraging financial resources for the green economy

May 12, 2011

Remarks by Rebeca Grynspan
UNDP Associate Administrator

European Union High-Level event on leveraging financial Resources for the green economy
12 May 2011

H.E. Mr. Sándor Fazekas, Minister for Rural Affairs, Hungary,
Commissioner Potocnik, Environment Commissioner, European Commission,
Fellow panelists,
Ladies and Gentlemen,

It is a pleasure for me to join this discussion on leveraging financial resources for the green economy and I thank the Delegation of the European Union and the Permanent Mission of Hungary for organizing this event.

At the UN Development Programme, we look at the issue of green growth as being central to development. But we also go a step forward to say that the challenge for development is to achieve inclusive growth dynamics.

The livelihoods of poor people in developing countries are the most exposed to environmental degradation and climate-related disasters. The same people are also the most vulnerable, as they have few, if any, reserves to drawn on when adversities strike.

To advance inclusive human development, while securing a greener, more sustainable future for our planet is, therefore, one of the greatest tasks of our time.

All of us —governments, the private sector, civil-society, and international organizations— need to work together to deliver on a sustainable and inclusive green future.

Public finance —one of the key subjects of tonight’s panel— will of course be critical to meeting this challenge. Recent developments to scale-up financial support and put in place an improved architecture, including the Green Climate Fund, are important steps in the right direction.

If inclusive and sustainable human development is to be at the center of green growth, we believe that, going forward, three principles should guide public finance —it should be equitable, efficient, and effective.

Let me expand briefly on each:

By equitable, we mean that access to public finance must be universal. The diversification of sources of climate finance in recent years has largely benefitted larger economies, but a future financial architecture must allow access for all developing countries. Sources of finance should be flexible enough to support the design and deployment of public finance for any developing country context.

By efficient, we mean thatpublic finance must be used catalytically. Itis clear that the total investment requirement to shift developing countries to a green trajectory is immense, and hence public funds must be used to catalyze far larger-scale of private investment. This means using public finance to create enabling investment environments, including for technology and innovation, and to remove domestic and foreign investment barriers.

By effective, we mean that public finance can have most impact when it is not treated in silos: be it climate, ecosystems, or development. Instead, public finance is most effective when it creates synergies —or win-win situations — between these three areas. An illustrative example is the promotion of sustainable agriculture: it can boost economic development, reduce emissions, increase carbon sequestration, protect biodiversity, enhance water conservation and provide a sustainable livelihood for farmers and communities —all at the same time.

At UNDP, we are putting these guiding principles for public finance into action in our activities every day. I’d like to touch on a few practical examples of how we are working with local partners to build a greener future.

In terms of equitable public finance, UNDP has established a number of environmental finance facilities to help countries access new sources of environment market finance. These include market mechanisms which actively engage the private sector. For example, the MDG Carbon Facility, which, working together with commercial banks, provides the private sector in developing countries with a direct link to the carbon markets.

For example, In Honduras, UNDP has assisted a cooperative of small farmers to put in place a waste-to-energy carbon project which converts farm biomass into electricity.

Similarly, in Rwanda, UNDP is behind an innovative project where carbon finance is funding the delivery of a basic social service —clean drinking water— to local school girls.

Another example is the recently launched EU/UNDP Climate Change Capacity Building Programme with the objective to strengthen the capacity of developing countries to identify opportunities for Nationally Appropriate Mitigation Actions (NAMAs) in the context of national development. This will support selected sectors to take action on climate change mitigation, with the participation of the private sector as appropriate.

In terms of efficient public finance, UNDP has long been one of the largest sources of technical assistance to developing countries in the area of market transformation for clean technologies.

This technical assistance —addressing policy, regulatory, and skills barriers— is often an essential precondition and complement to the financial de-risking instruments offered by development banks to catalyze climate finance.

In South Africa, for example, with the financial support of the Global Environment Facility, UNDP has been instrumental in putting in place an enabling environment for large-scale wind investment by the private sector. This has included the establishment of a feed-in-tariff, the building of local technical capacity, and the funding of demonstration wind farms.

Also in this area, UNDP is supporting the next generation of catalytic public finance mechanisms to engage the private sector at scale. For example, we have been collaborating with Deutsche Bank on a research partnership under the ‘GET-FiT’ initiative, which looks to catalyze large scale renewable energy deployment through feed-in-tariffs. Our panelist from Deutsche Bank may touch further upon this innovative partnership.

Lastly, but not least, in terms of effective public finance, UNDP is assisting national and sub-national governments in over 100 countries, to formulate inclusive low-emission and climate resilient strategies. These strategies help decision-makers identify development initiatives robust to a wide range of possible climate outcomes, and to promote synergies between development, climate and ecosystems finance.

This work is being implemented through a number of programmes and mechanisms, including the Global Environment Facility, the UNDP/UNEP Territorial Approach to Climate Change in cooperation with nine Associations of Regions, as well as the EU/UNDP Climate Change Capacity Building Programme I mentioned earlier.

The wealth of information gained through our programmes is systematically codified and shared with governments and a range of stakeholders through UNDP’s knowledge networks. Notably, UNDP has prepared a series of publications and tools, available online, to enable developing countries to acquaint themselves with a variety of methodologies most appropriate to their development contexts.

Allow me to conclude by emphasizing that, while the challenge of transitioning to a green economy is great, public finance —if used equitably, efficiently and effectively— can bring about inclusive green growth and has sustainable human development at its heart. Engaging the private sector will also be central to this endeavor. UNDP stands ready to work with all our partners to make this a reality.

Thank you.

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