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Intervention by Secretary General Meg Taylor, DBE to the Green Climate Fund Structured Dialogue With The Pacific


18–21 July 2017 | Tanoa Hotel, Nuku’alofa, Kingdom of Tonga

Session 2: Private Sector Engagement in the Pacific

 

-         Honourable Deputy Prime Minister Siaosi Sovaleni, Ministers and Heads of Delegation,

-         Mr Ewen McDonald, Co-Chair of the GCF Board,

-         GCF Board Members and alternates

-         Mr Howard Bamsey, Executive Director of the GCF Secretariat,

-         Your Excellences,

-         Representatives of regional organisations, private sector and civil society,

-         Staff from the GCF,

-         Ladies and gentlemen

Good afternoon and thank you for your kind invitation to provide some remarks on opportunities, challenges and enabling conditions for private sector engagement in the Pacific and how we are responding at the regional level.

In the Pacific, we witness the adverse effects of climate change every day – increasingly it is impacting our wellbeing, our security and the very livelihoods of our people. Building resilience to its impacts therefore is of the utmost importance but we know it has a substantial cost. TheADBestimatesthatthe cost couldbe anywhere between US$447 millionandUS$775 millionannually until2050.

Two weeks ago in Suva, I provided a statement on behalf of the CROP Executives at the closing plenary of the Climate Action Pacific Partnership Event, reaffirming our collective commitmentto support Pacific Island Countries through scientific and policy advice, technical assistance, coordination, and capacity building.

This week I am here as part of that ongoing commitment to support Pacific Island Countries in their engagement with the GCF to access finance for their adaptation and mitigation priorities. I am mindful that the road ahead is challenging. By 2020the World Economic Forum projects that globally about US$5.7 trillion will need to be invested annually in green infrastructure and much of this will be spent in today’s developing world. This figure is simply not achievable without genuine and durable partnerships and significant involvement from the private sector. In short, the private sector are crucial in shaping climate and disaster resilient development.

The Vulnerability of the Pacific and the Private Sector

Best estimates tell us that in our region from 1950 to 2014, extreme weather events have affected 9.2 million people, with 9,811 reported deaths and damage bills totaling US$ 3.2 billion. We know that one single event can undo decades of progress – for instance Cyclone Evan in Samoa in 2012 was estimated to have cost 30% of GDP. Damages from Cyclone Pam in 2015 cost Vanuatu around 64% of GDP, and the costs of damage from Cyclone Winston in Fiji in 2016 are estimated to be close to FJ$ 2 billion. Post event analysis indicates that much of these financial costs are borne by the private sector.

We know that there is strong interest within the private sector to act and yet they still tend to play a peripheral role, both in terms of their contribution to coordinated disaster response and to community resilience building activities.  

The GCF, through the private sector facility, and other financial mechanisms, provides an opportunity for business and government to evaluate how the private sector can contribute to improving resilience in the Pacific, which has been acknowledged in the Paris Agreement, Sendai Framework and the regional resilience strategy, known as the Framework for Resilient Development in the Pacific (FRDP).

Policy Support at the Regional Level

The FRDP recognises the critical role of the private sector in ensuring its implementation. It does this by giving clear direction on building public and private sector partnerships, building resilience within businesses, and supporting community preparedness. The private sector also plays a fundamental role in achieving a country’s international commitments, including the Nationally Determined Contributions (NDCs).

In particular, I would emphasise that within the Paris Agreement and Decisions the private sector is identified as a key partner in both the implementation of NDCs and mobilising the target of US$100 billion per year by 2020. Currently, private finance is reported to account for 69% of the global climate finance mobilised in 2015. For the Pacific, there is likely to be some finance provided by the private sector in the region, although much of the private sector will be seeking to access those funds.

Clearly private sector involvement is vital to ensuring climate finance reaches the necessary levels.  However, it is not only about accessing finance directly. Noting the growing influx of financial resources to the region for climate change and disasters, it is also vital to build capacity using these resources and to also utilise the potential of the ‘local private sector’ as providers of goods and services to ensure the projects are successfully implemented.

The region already has good examples of working closely with its local private sector. Examples include:

  • The Fiji Business Disaster Resilience Council, which was established in July 2016 as a coordination mechanism for strengthening the capacity of businesses and of their communities to prepare for and respond to disasters. This model is now being replicated in other countries;
  • The National Development Bank of Palau is working with the Office of Energy Administration and the Palau Housing Authority to provide loan subsidies for renewable energy and energy efficient homes; and
  • The innovative programs of SunPlus and SunAccess being provided by Sunergise focusing on reliable and affordable renewable energy.

Challenges and Options for Improved Private Sector Engagement

  • Ladies and gentlemen, Forum Economic Ministers have been discussing private sector engagement in climate change and disaster risk financing for the past few years. Some of the practical challenges they identified in April this year include:
  • Lack of institutional structure of the private sector to maximize its potential to contribute to resilient development;
  • Lack of information on the opportunities and meaningful interaction by government with the private sector;
  • Limited understanding by the private sector of their role and how to maximize their role through access to resources as well as limited understanding of the role that the Pacific private sector can play;
  • The burdensome requirements and fiduciary standards applied by funding agencies regardless of size, capacity or need; and,
  • Limited understanding by the private sector on the available funding sources and how to access them.

In discussing this at FEMM, Economic Ministers considered some of the following possible options to address the challenges:

  • Enhanced engagement by government of the private sector;
  • Strengthening the capacity of the private sector, especially though training, partnerships, funding and business plans to understand and incorporate climate and disaster risk;
  • Sharing of private sector resources between those more developed with those less developed neighbours;
  • Enhancing public private partnerships through clearer processes and terms of engagement where appropriate; and,
  • While often discussed there is a need to continue to build the necessary political, institutional and financial frameworks to support the development of Public-Private Partnerships.

To date, the Forum Secretariat, UNDP, SPC, GIZ and partners have undertaken national climate change finance assessments in eight Pacific Island Countries[1]. From these and other reports it has been suggested that the private sector will need to work closely with relevant GCF accredited implementing entities and the National Designated Authority in respective countries, to develop and submit project proposals. However a key issue that hinders small and medium enterprises from access to finance relates to the current financial regulations which commercial and development banks operate, particularly prerequisites such as ‘guarantees’, ‘credit rating’ and ‘bankability’. These must be made flexible in order to incentivise private sector engagement. For example, opportunities for local chambers of commerce, hotel associations, the manufacturer associations, exporters councils, retailers associations and so forth to access readiness funds more easily with readiness partners might also help.

There is also a need for ongoing and deeper dialogue. In particular, through the Private Sector Dialogue, the Forum Secretariat is providing the venue for the private sector to link with partners to understand how to access finance which is so critical to the achievement of the national development plans. 

To conclude, we need to be ambitious and daring with our plans for building and developing partnerships between the private, public and other non-state actors. When you consider the current US $100 billion annual goal in the Paris Agreement that is usually referenced it is only a small piece of the US$5.7 trillion puzzle. Both public and private levels of funding need sustained growth to ensure that we get on a pathway to meeting investment needs in 2020 and beyond.

 

Thank you

 


[1]Nauru, RMI, Tonga, Samoa, Fiji, Vanuatu, Solomon Islands and Palau.

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