simon zadek » Business Versus Business: Applying Kandinsky’s Test Of Madness?

Business Versus Business: Applying Kandinsky’s Test Of Madness?

simon — Thu, 15 Dec 2011 03:54:03 +0000

Optimism in the face of repetitive failure is a sure sign of madness, I wrote in the article, Time for Progressive Companies to Deal with the Climate Bad Guys, published two weeks ago in The Guardian. Progressive CEOs need to apply their corporate muscle effectively, and that means challenging those businesses preventing a timely transition to the sustainable economy.

Heated responses to my argument were, shall we say, ‘racy’, in fact in the main dismissive and ridiculing. Such emotive comments are typically elicited in response to either idiotic ideas or insights whose time has not yet come. Like peoples’ views on the first cars, telephones and computers, the mainstream response to the world’s first, externally audited corporate sustainability report, from The Body Shop in early 1996, was almost universally patronizing and dismissive. Today, the company’s iconic leadership is widely recognized. Similar responses reverberated across the media and business community when Rio Tinto, BP and Shell launched their human rights policies in 1997.

But some ideas are of course just plain silly, not unrewarded strokes of genius. The trick, as Kandinsky reminded us in his insightful pamphlet in 1910, the Spiritual in Art, is to distinguish the rantings of the insane with those of the artist.

Guardian executive editor, Jo Confino, was curious enough to use my piece as a talking point in interviews with a number of leading folks working in the business and sustainability space. Their responses, at their core, mirrored the ad hoc comments to the blog, with departing WBCSD president, Bjorn Stigson and others persuasively arguing the need for progressive businesses to focus on advocacy based on demonstrated business value in doing the right thing. Bjorn in fact condemned my proposed approach as actively counter-productive.

Well yes, many people, including myself, have spent much of the last two decades pursuing exactly this line, emphasizing the benefits for business. My publications back in the early days included ‘Conversations with Disbelievers’, with the underlying tone and approach being replicated in ‘The Civil Corporation‘. For the national level, whilst at AccountAbility, the potential for the ‘responsible competitiveness of nations’ was promoted in theory, cases and through the biannual Responsible Competitiveness Index.

But at issue is not whether one should argue this line, but whether it is working in driving change in the right direction, to the right scale, and at the right pace. The answer to this, in a nutshell, is yes, no and emphatically no.

As Sir Nick Stern in Durban has declared repeatedly, ‘we have lost our sense of urgency, but have no reason at all to be complacent’. Jo apparently agrees, concluding, “…the time is past for quiet diplomacy. The risks are too great. The time is too short. What progressive businesses need to do is be far more assertive and public in their demands on politicians”. But Jo also reflects, “…direct attacks on other companies, I am not so sure”.

Exemplary practice has always had its place in leading change, but has rarely if ever been sufficient alone to drive historic, quantum changes. This assertion is all the more true where incumbents benefit from the status quo, as is the case for the carbonized, industrial economy. The current history-in-the-making of the financial sector is a case in point. The IMF estimates that leading US financial institutions spent no less than US$5 billion on political lobbying in DC over the period 2007 to 2010, at exactly the same time they were being bailed out with taxpayers money, principally to prevent regulations coming into force that would reduce their risk appetite and endanger their profitability. Lobbying against the financial transactions tax, similarly, has involved a spectacular mobilization across Europe and the US. And of course similarly with climate, as Greenpeace summarizes in its provocative report, Who Is Holding Us Back.

So applying the Kandisky test, if my argument is madness, then it is not because of misplaced urgency or mistaken concerns over the power of incumbents. Furthermore, I am in good company, literally. When John Browne, then BP’s chief executive, called out climate change in his infamous Stanford Business School speech, he was speaking out powerfully against his peers. When Jeff Immelt co-led the launch of the US Climate Action Partnership, similarly, he was widely condemned by his corporate peers. Major utilities and other companies, including Exelon, Pacific Gas and Electric Co. and New Mexico-based PNM Resources Inc., made high-profile exits from the US Chamber of Commerce in 2009 over differences in views over climate related policy advocacy.

Businesses compete with businesses in the market places for ideas and public policies as well as goods and services, talent and finance. Competition, as well as collaboration, takes many forms. Clearly first past the post in selling stuff, hiring great people and getting cheap finance is business in full fling. But more complex warfare is also part of the puzzle for any but the luckiest or smartest. Coalitions of the good and willing are great, but just don’t get us far enough, quickly enough.

To get to where we need to be means disempowering incumbents blocking change. Greenpeace and other civil society actors do a reasonable job, but not an adequate one. Businesses need to step up and more visibly join the fray, so helping their customers and employees mark out the difference between the good and the bad guys.

Kandisky’s litmus test was that the difference between artists and crazies is that the former create images that help those who gaze on them make sense of themselves and the world around them. Time will tell whether good business will increasingly call out the bad guys in the months and years to come. My guess is that my proposal, and my prediction will pass Kandisky’s test as the real deal.

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Hey, I’ve Been Cartoon Animated !!

simon — Thu, 08 Dec 2011 21:33:25 +0000

You’ve got to laugh, an animated cartoon of myself and The Guardian’s George Monbiot debating the motion at the Royal Society in London that ‘London’s Climate Policy Should Start in Beijing’. Its unclear whether the cartoonist saw me as a priest or a used-car salesman, perhaps some blend of the two. But here it is.

In summarizing the debate, I argued that China has a long-term economic and industrial policy, not a climate policy per se, whereas the UK has a well-defined climate policy, but not a serious economic policy, even for the short term. What the UK needs, I concluded, was exactly such a policy, perhaps drawing lessons from China. For those who prefer the real thing, a video of the actual debate is available, as below.

For those who like good-old text, the Huffington Post published an article days before the event setting out some my arguments.

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President Zuma Endorses South African Renewables Initiative

simon — Sat, 03 Dec 2011 13:02:56 +0000

President Zuma today endorsed the South African Renewables Initiative as a South African-led, international, lighthouse initiative designed to enable the scaling up of renewables in South Africa by reducing the incremental cost burden to South Africa’s citizens, economy and jobs…the relevant part of his speech is below:

“Ladies and gentlemen,

As we noted, the biggest barriers to developing renewable energy in Africa to date are not technological, but financial.

In that regard, South Africa has been hard at work in the development and design of financial instruments aligned to our national plans for green growth. During the course of COP 17 we will be launching a key initiative that could kick-start major development for renewable energy generation and industrial development.

The South African Renewable Initiative (SARi) funding mechanism will help us unlock South Africa’s green growth potential through the funding of large-scale renewable developments. This will be achieved with the assistance of global partners – donors and Governments, who will provide innovative funding solutions to facilitate it.

Renewable energy still costs more than non-renewable energy, which in South Africa is largely supplied by cheap, abundant coal supplies. It is estimated that the renewables’ targets indicated in our Integrated Resource Plan 2010 would add an average incremental cost of around 660 million US dollars to South Africa’s annual electricity bill up to the year 2044. The SARi model will enable us to deal with the high cost through low cost loans and other financial instruments combined with time limited pay-for-performance grants.”

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Thank you Harvard…

simon — Fri, 01 Jul 2011 03:55:23 +0000

Dear Jane and John,

As my long standing senior fellowship (non-resident) comes to an end, let me start my saying that I have been honoured to be part of your elite swot team assembled to advance the business and sustainability agenda in and through Harvard’s hallowed halls.

It feels like just yesterday since you, Jane, arrived at Harvard with revolutionary intent, mandated to lead the newly-established Corporate Social Responsibility Initiative. In fact, a little googling (my memory no longer serves me well, sadly) informed me of the remarkable fact that the initiative was establish way back in 2004, deep history by the standards of today’s fast moving world.

And what a tumultuous period it has been in our modest neck of the woods. The business and sustainability agenda has hit the mainstream over the initiative’s life. Even the most sceptical policy folks, previously cycnical in their dismissal of this agenda, have embraced it as both having analytic power and offering a potential pathway for change at a time where well-worn routes appear to be dead-ends. And amazing progress has been made in many areas, not least because of the two of you. John, you have advanced us all in your moonlighting role as UN Special Representative on the issue of human rights and transnational corporations and other business enterprises (which I now realise goes way back to the 25th July 2005, just after the initiative was born). And Jane, you have in your unqiue style advanced the agenda on so many fronts through the sheer force of your commitment, passion, energy and insights. We would all be very much less without your leadership.

History has of course played its own modest role in advancing our agenda into the mainstream. There has been no better advertisement of our core message than the meltdown of the global economy and the destruction of tens of trillions of dollars of our childrens’ future earnings resulting from the irresponsibility of the financial sector. Whilst we did not entirely miss this (indeed some of us folks predicted it), we have proved powerless to prevent it and to date distressingly silent in shaping a response (more on this below). And of course there has been the complete breakdown of the global climate negotiations in the face of corporate lobbying in favour of a carbon laden atmosphere to ensure profits-as-usual. Most of us spotted this one coming, to be sure, but maybe forlorn hope prevented us from preparing the ground for what has to come next. At least these failures have not gone on that long, certainly not as long as the ever-running Doha Trade talks sitcom facing perpetual green rooms in the face of French and US farmers (oh, and the Swiss).

As so often in our business, the glass is both half full and half empty, although in this case we might reasonably conclude that it was an unfair match. So for better and worse, business and sustainability has become a key currency in the matter of global change. What we wished for has come to pass, although not always quite in the form we had hoped for.

Which begs the question: what next? We need an agenda for the next decade of our collective work, and who better to set it than you two through the initiative you have successfully navigated through exciting but troubled waters.

Our collective work, represented so well in the out-pourings of the CSR Initiative, help in pointing the way forward. The work you have published on China is a case in point, including work on China and Africa such as Corporate Responsibility in African Development, points the way towards part of the agenda facing us, also reflecting the broader debate about how emerging nations will reshape the sustainability agenda in their image going forward. And this surely is closely entangled with the deeper agenda of the evolving relationship between business and government, the name of the Harvard centre of which you are part. In my early days with you, I shamelessly borrowed from Harvard colleagues the language of collaborative governance, and offered up The Logic of Collaborative Governance as my opening published contribution. Looking back on that a peice, and despite its weaknesses, it still goes (albeit simplistically) I suspect to the heart of the matter.

Missing from the core portfolio to date, perhaps, has most notably been any penetrating work on the capital markets, a topic that has to advance now from our incrementalist approach to a more systemic analysis and approach to intervention in this keystone of our global economy. But perhaps despite the ending of my formal fellowship with you, we will find ways to collaborate in this crucial space through my work with the Centre for International Governance Innovation and the Institute of New Economic Thinking. Certainly there is plenty to do in this space. And alongside such work, it is surely time to review the development and role of civil society in the matter of business and sustainability. Mike Edwards has recently pushed me to write on this topic as part of an edited volume he is due to publish shortly, and I must confess that the reflective experience in doing so has left me wondering what is to come.

So once again, dear Jane and John, I have enjoyed, and grown through my involvement in your initiative and am hugely appreciative as a result. I only hope (and indeed assume) that you will continue to push forward our collective labours in months and years to come.

Simon Zadek

President Zuma Supports Ambitious Renewables Play

simon — Thu, 03 Mar 2011 06:42:58 +0000

The South African Renewables Initiative, you may recall from previous blogs, has been established to:

“Secure financing arrangements enabling a critical mass of renewables development, with the associated economic and climate-related benefits, without incurring unacceptable incremental cost burdens on South Africa.”

Advancing such major national initiatives is no mean feat given perverse market signals, public investment priorities and the host of other factors that constrains us in addressing climate challenges and green growth oppportunities. But progress in this case is being made.

President Zuma has now spelt out in a key speech that he sees the initiative as key for South Africa in progressing along a green growth path. In a message to the members of the UN High Level Advisory Panel on Global Sustainability (which he co-Chairs), delivered on the 24th February in Cape Town by the Minister of International Relations and Co-operation, Ms Nkoane-Mashabane, the designated Chair of COP17, he said, and below is set out the complete excerpt from the text given its significance:

“And here I would like to pause, and focus for a minute on an ambitious initiative which has the potential of catalysing South Africa’s transition to a greener growth path. I am referring to the South African Renewables Initiative, or SARI for short. The South African Renewables Initiative is still in the early stages of development. It is being established to catalyze industrial and economic benefits through an ambitious scaling –up of renewable energy in this country.

There are multiple challenges in bringing this initiative to fruition. In the early conceptualisation phase, we were faced with two possible approaches. We could either introduce renewables in an ad hoc way, in which it does NOT become part of the broader energy mix, in which there is NO localisation, and in which renewable energy remains on the margins of the South African economy. Or we could be bold and ambitious, and introduce renewable energy in a systematic way, as part of the energy mix, as part of the institutional matrix, and at critical scale so that it delivers industrial development along the value chain. The key challenge, which we are still working on, is to find an innovative solution to financing the incremental costs of renewables, so that we can achieve critical mass with minimum burden on the South African economy and its domestic energy consumers. Our vision is that SARI will act as a vehicle to deliver an integrated industrial, technology and financing strategy that could unlock SA’s green growth potential.”

President Zuma’s speech goes on to suggest that the challenges facing the South African Renewables Initiative is similar to those facing every nation and community in advancing a sustainable economy:

“This is an ambitious programme, and I mention it only because it has raised a number of very practical challenges which I believe are not unique to South Africa, and which are central to the issues that the Panel is addressing. These are challenges which require an economic, technology, financial and institutional analysis to inform the strategic design of any programme or initiative that underpins a transition to a greener and more resource efficient economy.

1· An economic analysis must ask the question: what are the economic and industrial benefits at scale, of introducing this programme? The answer must be embedded in national industrial strategy.

2· A technology analysis must ask the question: what is the cost and benefit profile of different technologies over time?. And further, what is the optimal technology mix? The answer must be embedded within the national technology policy and strategy.

3· A financial analysis must ask the question: what are the incremental cost implications of this technology mix,? And further, how can these costs be reduced, and how can appropriate financing be secured for all stages of the process – from pioneering to fully commercial.

4· An institutional analysis must ask the question: What are the potential risks in all phases and dimensions? What institutional arrangements are needed to adjust for, and manage the risk? In addition what institutional arrangements are needed to facilitate the policy and legislative reform that may be needed – and to underpin the technology development process as well as the financial flows.”

“These are the kinds of challenges”, the President concluded to the prominent members of the UN High Level Panel on Global Sustainability, “that developing countries in particular are facing in the transition to a lower carbon and more resource efficient economy. And in my view, these are the kinds of practical questions that this Panel should be addressing, drawing on lessons learned from all parts of the world.”

Too right !

Green Economy Goes Viral, Virtually…

simon — Sat, 26 Feb 2011 05:09:29 +0000

Images of the green economy have gone viral, as a rash of celebratory reports hit the streets. But is this the long-lost key to the secret garden of sustainable development, or yet another impossible maze of words of wish-it-could-be-but-it-isn’t?

Most visible has been the report, ‘Towards a Green Economy‘ launched last week at the global headquarters of the United Nations Environment Programme (UNEP) in Nariobi. Backed up by several years work undertaken by hundreds of smart folks working in dozens of research institutes around the world, this report may not be the last word, but it is the ‘big word’. Inspired by UNEP’s charasmatic Executive Director, Achim Steiner, the work is designed to both promote the practical potential of an economy that values environmental costs, as well as seeking to advance UNEP’s voice in the economic sphere.

UNEP’s work is a veritable treasure trove of ‘can-do’ examples of the green economy in action mixed with compelling analysis that reinforces the underlying ‘must do’ message. But a close reading reveals two disquieting aspects of this otherwise commendable piece of text. The first concerns ‘green jobs’, the essential political currency of the green economy especially for emerging and developing (not-so-emerged) nations. UNEP’s bottom line is more or less that ‘the green economy will produce at least as many jobs as a business-as-usual pathway’. Not only is this constructed like a Wall Street legal disclaimer, but its message is disturbing given the raft of other UNEP-style reports declaring that a business-as-usual economy will eventually implode through climate stress, water scarcity and social disruption. If UNEP’s job’s message is meant to inspire or even reassure, it fails on both counts.

UNEP’s second wobble is in its analysis of capital markets. Whilst one would never wish to suggest that a UN agency bowed to the pressure of the bankers, it has to be said that the report’s tepid handling of this critical issue does make one wonder ‘what happened on the way to the printers’. Green finance is a major topic in the report, but the problems of endemic short-termism, commodity (and in particular food) speculation, perverse incentives and a general lack of interest in Main Street on the part of Wall Street is, in a nutshell absent from the analysis, which in turn makes the recommendations on finance curiously thin.

You may be wondering if green growth is merely a pithier name for that media disaster, sustainable development. Rest assured it is not, accordingly to the analytically inclined, rich nations, think tank, the OECD, which pronounced recently on the topic:

“Sustainable development represents a grand paradigm linking economy, society and environment, whereas a green growth strategy proposes an a policy framework. In that sense, green growth is more concrete. The principles of sustainable development reflect long-term aspirations, while green growth combines efforts to exploit opportunities to shape a more robust economic recovery in the short-term with promoting new, greener sources of growth over the longer-term.”

Well there you have it…maybe. Mark Halle, a director at the International Institute for Sustainable Development and one of the guiding hands of the UNEP report, would be amongst those who would argue otherwise. He would almost certainly stress the importance of the green economy lens as being that it forces sustainable development geeks to get literate, smart and engaged in fundamental economic transformations that are pre-requisites for sustainable development. Development advocates on the other hand, especially from the South, see the green economy as a narrowing away from equity and rights issues, and a dangerous source of protectionism by a failing Western elite.

Whatever your definitional bent, the ‘green economy’ lens is not set to go away anytime soon, forming an important part of the broader development narrative that we have to grapple with and hopefully put to good use in the years to come. It is likely to be the star participant in the UN’s Rio+20 in early 2012, but before that will be ever-present through a growing array of initiatives, promotional events and engaged institutions, not least the UN High Level Panel on Global Sustainability (that i have discussed elsewhere), and the newly-established South Korean-sponsored, Global Green Growth Institute.

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Could there be a second Brundtland?

simon — Fri, 21 Jan 2011 16:30:07 +0000

Could there be a game-changing Bruntland Report II. That has got to be in the mind of Ban Ki Moon in his recent creation of the UN High Level Panel on Global Sustainability.

Co-chaired by Tarja Halonen , President of the Republic of Finland, and Jacob Zuma, President of the Republic of South Africa, the Panel is a rollcall of the smart, great and, hopefully, good.

The game plan is to develop a policy platform and agenda in the run-up to Rio+20 that will happen in early 2012, unsurprisingly in Rio. But one clear signal is that business and sustainability and the green economy will be core to the agenda. There is no doubt that we need to reset where we are on these agendas, as I pointed out in my blog on the Valley of Death. Fortunately, the sole panel member, Jim Balsillie, Co-CEO, Research in Motion (Blackberry), will be pretty intolerant of incrementalism.

So as some lost souls head for Davos, this High Level Panel is gearing up to make itself visible on the Magic Mountain. Zuma and many other Panel members will array themselves for the occasion, whilst the ‘backroom folks’ such as myself get on with the job.

National Action on Economics – the New Climate Narrative

simon — Sat, 04 Dec 2010 14:37:36 +0000

Weeks before COP15 at Copenhagen, ChinaDialogue and OpenDemocracy published versions of my ‘Plan B’ blog, where I argued that national initiatives would form the base currency of climate management for the foreseeable future, and the sooner we got with this new narrative the quicker we could work out how to get it done.

In a nutshell, I argued not just that a decent deal would not be done at Copenhagen, but if my accident one was indeed cut, it might prove to be a distraction that absorbed much energy (the human kind) and money, and most of all time, until its inherent shortfalls became apparent. In summed up the potential shortfalls in a paper prepared as part of Project Catalyst as the “five institutional horses of apocalypse”, bureaucratisation, undue political influence, gaming, rent-seeking and good old-fashioned corruption. Rather, I argued, focus on getting a few national initiatives driven by economic self-interest going, supported in places by international co-operation, and this might just then tip us into a far better global deal with greater emphasis on promoting green growth and development than in securing international public transfers.

My argument proved unfashionable at the time, and folks piled in both publicly and privately to point out how wrong I was. Plan A was the only way forward, came the riposte, and there was a real danger in saying anything else because it would undermine the very possibility of achieving it.

How time flies, and fashion with it. Getting climate off an inaccessible place in today’s media requires one to talk about green growth and energy security. The very ‘C’ word has become passé in policy and business circles, and even the staunchest defenders of the faith such as the United Nations Environment Programme are turning to instrumental economic arguments to promote climate change. At a recent World Economic Forum meeting in Dubai, informing people that I was part of the climate change ‘global agenda council’ was like saying that I had some incurable disease or body odour, a sure-fire way to lose friends and even enemies.

Cancun is proving less fashionable and more conflicted. Negotiations and associated grandstanding remains focused on not so much climate as ‘climate accountability’, with the Third World Network leading the charge, and indeed making the charges, on behalf of the G77. But on the sidelines, the green growth story has emerged as the most interesting conversation along the beachfront.

My time in Cancun will be spent in these side shows, and I have been privileged to be involved in some interesting ‘green growth’ initiatives in the last year. Most absorbing has been the South African Renewables Initiative, a set of policy options developed for the South African Government’s Department of Trade and Industry. At its heart is the opportunity for South Africa to take advantage of major economic opportunities by increasing its renewables, and a proposed means for financing the US$9 billion or so incremental costs through the smart use of available concessionary debt, risk-mitigation instruments and some international and domestic public finance. The net-net option for South Africa is to a secure a huge investment with little domestic burden.

Second in line has been my involvement in the World Economic Forum’s Critical Mass initiative, formed in early 2010 in the wake of Copenhagen and the Forum’s earlier work on how best to leverage private finance for low carbon infrastructure investment. The initiative has spent the year working out what it takes to move forward, yes, you guessed it, major national initiatives driven by economic self-interest and supported internationally. In fact the South African initiative was one of the cases, alongside others that focused for example on solar in India, energy efficiency in China.

Third and last is the next Project Catalyst paper in a long line of data-driven analytics. You might recall that this initiative, powered by McKinsey and friends and paid for by the ClimateWorks Foundation, was influential in shaping the climate finance debate right through 2009, at least in helping to establish a broadly used methodology and some consensus on key aspects of the mitigation costs to 2020 associated with achieving a 2 degree pathway. This latest paper provides an excellent bridging of the old and the new narrative, including a helpful analysis of the work of the UN High Level Advisory Group on Climate Finance, which has recently reported on how to mobilize the US$100 billion a year by 2020 set out in the Copenhagen Accord. Crucially, it shifts the lens outside of the narrow and problematic ‘climate finance’ lens and opens the door to a broader analysis of how to green the wider global pool of finance.

We are living a Plan B world, however much folks want to deny it, or else bury it dead or alive. There is no conceivable global deal to be done that could have the strength alone to advance action on mitigation and adaptation at the scales needed to meet the science or the requirements of vulnerable communities. There are international deals to be done, however, and important ones at that. Bilateral and mini-lateral deals to develop low carbon infrastructure, leveraging mutual economic interests and public financing grease to make it happen, such as export and investment credits. It is very important to move to deflect a trade and investment war fought out in the World Trade Organisation over public involvement in paying for low carbon developments that do enhance export competitiveness. And there are clearly opportunities to secure some funds from carbon markets and some from Northern (and Southern) tax-payers that could be advanced in the context of an international framework.

Most of all, of course, the global process needs to maintain public interest and momentum, track progress and promote innovations – in fact, exactly the things it is not doing very well, or in some cases at all. Drip feeding the process with a Plan B mindset would help, such as the stuff outlined above.

Amazon Fund: Radical Simplicity and Bold Ambition

simon — Thu, 25 Nov 2010 10:43:50 +0000

The Amazon Fund is an innovative and nationally developed climate finance fund, designed to mobilize funding to support the combat of deforestation and sustainable management of forests. It was set up by the Government of Brazil in 2009, and is managed by the Brazilian National Development Bank.

The Amazon Fund’s design aims to ensure sufficient and appropriate accountability to local stakeholders and to funders but also, crucially, to direct funding towards projects and activities that catalyse a transformation towards low carbon development in the Amazon. It has now awarded its first grants and is growing from being an ambitious start-up initiative to a fully operational part of Brazil’s institutional framework for managing the Amazon.

I have worked together with Maya Forstater and Fernanda Polacow have been working with the Amazon Fund over the past two years to understand the lessons learned from the development, design and early implementation of the initiative. Supported by Fundación Avina, the findings are summarised in a working paper: Amazon Fund: Radical Simplicity and Bold Ambition – Insights for Building National Institutions for Low Carbon Development.

The paper highlights the Amazon Fund as a crucial early experiment in developing a national climate funding entity, with key design innovations:

Performance-Based Financing: the Amazon Fund provides simple intermediation between pay-for-carbon funds and project investing.
Restricted Multi-Stakeholder Governance: a multi-stakeholder committee involving federal and state officials and civil society representatives provides oversight, but the fund’s managers have significant autonomy.
Low-Cost Local Management: the Fund is managed by the national development bank BNDES, with an agreement to take 3% of donations to cover costs.

Core to the Amazon Fund’s design was a decision to ‘start-fast and evolve’ with a simple structure. However, while it has been able to get started quickly, it has begun to face design and operational challenges as it seeks to evolve towards greater impact in effectively tackling the economic and political drivers of deforestation.

Currently the Amazon Fund is caught between simplicity and ambition. In future its stakeholders must decide whether to develop it as a simple, low cost funding mechanism within a broader Brazilian Reducing Emissions from Deforestation and Forest Degradation (REDD) system, or as a mature institution that is proactive in fundraising and investment, learning and influencing broader systems.

The Working Paper draws on a series of interviews with key Amazon Fund stakeholders in Brazil and internationally, who are navigating this pathway, and who have discussed with us the challenges and success factors they have experienced. We hope that the study will provide useful insights to the Amazon Fund’s Board, executive and principle supporters, as well as to those involved in developing climate and forestry initiatives in other countries.

Beyond Climate Finance – a Cancun Agenda

simon — Sun, 21 Nov 2010 07:28:23 +0000

Climate finance, now the focus of much of the international climate negotiations, are those funds designed to address the climate challenge and its implications. Framed by the principle of common and differentiated responsibilities, climate finance has become synonymous with the accountability of richer nations to support the mitigation and adaptation efforts of poorer nations. This crucial principle has informed the work of the UN High-Level Advisory Group on Climate Finance, discussed elsewhere in the paper, and underpins its conclusions and insights.

The focus on climate finance has delivered practical results, including significant financing for REDD+, funds associated with carbon markets, and additional international public financing for adaptation. Although falling short of what is needed, these results are tangible and significant. Over time, however, practice on the ground has progressed largely independently of either climate finance or the associated principles of responsibility and accountability. Ambitious renewables programmes from Morocco to China and South Africa, and broader green growth strategies from South Korea to Brazil exemplify how green growth and development are becoming the lens through which our responses to climate change are, and need to be framed, designed and implemented. Such a reframing remains fundamentally about how to advance mitigation and adaptation rapidly and effectively. But the lens shift is more than new words to describe old needs and solutions.

Economics, rather than just financing, is the crucial difference. Much of the work done to date on ‘low carbon growth plans’, for example, remains centrally about least cost mitigation and adaptation, how to avoid or solve a problem as cost-effectively as possible. Such plans, with notable exceptions, do not take account of the potential and additional challenges associated with the economic dynamics of investing in green. Policy debate about mitigation is rarely placed within a broader economic analysis, and so remains the preserve in most instances of ministries responsible for the environment, energy and finance.

Reframing the conversation towards green growth and development is more than a change in words, opening up new financing opportunities, because of the economic and broader policy objectives that are addressed as a result. Energy security concerns in Europe make attractive the potential for tapping renewables generation in Morocco, and so impacts its openness to investing in, and paying a premium for such energy. Economic growth and related employment gains from localising parts of the global value chain in renewables – manufacturing, servicing and in some instances research and development – underpins policy-led initiatives from Ontario to South Africa, and an openness to put public funds on the table, often with the prospect of seeing much of it return through increased tax revenues from the resulting increased economic activity. Concessionary finance, especially debt, must be made available for mitigation not only from climate-focused funds, but those focused on export and investment promotion where industrial joint venture opportunities exist, as they increasingly do.

Finance to address “only” climate will likely be a moderate proportion of the funds needed and available to pay for the transition of economies onto low carbon trajectories. Reality on the ground is that finance for green growth and development is already, and will continue to come in many shapes and forms, from reconfigured international development assistance through to profit-hungry private equity. That does not mean that economic opportunities, and associated national self-interest, will always and everywhere exist. And negative impacts of climate change on vulnerable communities will remain a core issue that needs to be addressed with new public monies from the international community. But even in such cases, specialised climate finance is so far playing a relatively small, remedial role, and the challenge and opportunity is to leverage what is out there to better effect. That is, to remain within a ‘climate finance’ paradigm is self-limiting given what needs to happen on the ground and starts emerging in some countries’ programmes, and given what could happen if such cases were leveraged through replication elsewhere.

The opportunity and need is to allow for innovations in financing that take advantage of national self-interest and international co-operation within the framework of international accountability that underlies the negotiations. Treating them as alternatives, or worse still as mutually exclusive, narrows the scope for action and reduces the potential of the negotiations to advance change on the ground.
Advancing such an approach in practice could be helped by three steps. Firstly, exemplary national actions need to be better understood, especially the pathways along which such ambitious, nationally-led initiatives, leveraging international co-operation are being built in practice. Several initiatives such as the World Economic Forum’s Critical Mass initiative, are already active in this learning space, but more is needed. Secondly, is to determine how such initiatives are already, and can best be supported by mechanisms being designed through the climate negotiations. And thirdly, in rapidly maturing the work on low carbon plans to reflect more fully the economic opportunities and dynamics and the associated financing opportunities, ensuring a focus on how best to achieve maximum leverage from scarce public resources.