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In Africa, climate finance is development finance
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COP17 is well underway and the real negotiations around climate change start. Geoff Sinclair, Standard Bank Group’s Head of Carbon Trading, looks at the role that Africa has to play when it comes to finance and climate.

“Climate finance equates to development finance at many levels, not least because the management of climate change is such a new discipline that there are still no definitive, standardised methods to work from.

”So, beyond acknowledging the realities, the idea of managing climate change is still being developed and “the concept itself is being adapted to by governments and boards of directors all around the world.

”Similarly, the funding needed to enable implementation of energy efficiency, renewable energy sources, appropriate waste management, and environmental management is also undergoing a process of development and evolution.

“In the context of all this flux, the concept of development finance as it is traditionally applied in terms of assisting emerging economies to grow and integrate with the global mainstream economy, is too limited. When it comes to climate finance, even developed economies need help to become green.

“All of which means that everyone’s learning and that everyone has to innovate somewhere along the line.

“It’s an ideal scenario for Africa in particular. Why? Because Africa is the clean sheet on which humanity’s collective knowledge about finance and climate could be jointly written in the most coherent way possible in order to produce economies that are green from the ground up.

“African economies, for the most part, are not as industrialised as those of the developed nations. So, there’s not much retro-fitting to be done to make factories and mines less carbon intensive. That’s a saving, seen from a financing point of view and from the point of view of a developed world needing to find funds to encourage climate resilient and low carbon growth on the continent.

“At the same time, the absence of conventional industrialisation creates an opportunity for low carbon industries to be set up from the outset.

“That means that, if we’re all clever about it, Africa’s further development could be based on entirely new industries and markets rather than constantly playing catch up in the conventional ways of producing commodities and products that are so entrenched in developed economies.

“Africa could leapfrog the old world to be both the leader in and the symbol of a green future for the entire planet.

“It is already the centre of expectations that it will become the world’s food basket. It is also being acknowledged as the final investment frontier capable of delivering super returns. If you add to that the possibility that it will become the world’s climate safety valve, then foreign direct investment (FDI) for Africa should be easy to motivate.

“Becoming green could just be Africa’s best bid for stronger FDI flows. Right now, of course, all these opportunities are just that: unrealised options. We have to make them concrete. And one of the most effective ways of doing that is the innovative use of climate finance. A lot has already been achieved through the clean development mechanism (CDM) of the United Nations Framework Convention on Climate Change (UNFCCC) under the Kyoto Protocol, but there are other innovations worth exploring further.

“That’s because the CDM is good business. Companies that need to offset their carbon emissions get a business benefit from funding low carbon development in emerging economies. Communities in emerging economies who sell their carbon credits gain revenue that enables them to develop. Their development brings in additional revenue. So, the CDM triggers sustainable growth in emerging economies and gives the developed world time to retrofit for greener production.

“And, if Africa uses the CDM to create green industries, green markets, and green products it will gain an economic advantage that centuries of conventional development could never give it.

“That’s what the focus of climate finance in Africa should be. It will require innovation in financing similar to the innovation we see in the development of green technologies and products.”

If you’re in or around Durban, visit us at the South Africa Climate Change Response Expo for the duration of COP17.

For more info, visit http://www.blog.standardbank.com/blog/2011/11/green-drives-waves-banking-innovation-customers

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