Addressing Climate Finance Challenges and Sustainability Imperatives : Daily News Analysis

Date : 26/09/2023

Relevance – GS Paper 3 – Environment and Ecology

Keywords – Greenwashing, CoP-28, Climate finance, Infrastructure

Context –

As we move from UN Climate Week (13-17 November 2023) to CoP-28, it's imperative to shift our focus from mere wishful thinking and superficial sustainability claims. Instead, we should concentrate on identifying the mechanisms that empower the private sector to direct increased funding toward climate resilience and sustainable development.

The New Collective Quantified Goal (NCQG) : Advancing Equitable ...

"The Three Greens" Unveiled: Greenwashing, Greenwishing, and Greenhushing

Greenwashing:

  • Greenwashing entails the misleading practice of making false or overstated assertions regarding a company's products, services, or practices' environmental friendliness.
  • For instance, consider Starbucks introducing a straw-less lid under the pretense of reducing its environmental impact, only to discover it contained more plastic than the previous lid and straw combined.

Greenwishing:

  • Greenwishing involves organizations expressing a desire to enhance their environmental responsibility without taking concrete actions to realize those aspirations.
  • It's akin to making a wish for sustainability without any tangible steps directed towards achieving it.

Greenhushing:

  • Greenhushing denotes a scenario in which an organization intentionally downplays its positive environmental accomplishments.
  • This may involve refraining from publicizing sustainable practices for various reasons, such as humility, apprehension of criticism, or minimizing external communication.

About Climate Finance

  • Climate finance encompasses funding from diverse sources, including public, private, and alternative channels, at local, national, or transnational levels. Its primary aim is to support both mitigation and adaptation initiatives designed to combat climate change.
  • International agreements like the Convention, the Kyoto Protocol, and the Paris Agreement emphasize the need for financial assistance from wealthier Parties to aid those with fewer financial resources, particularly those facing heightened vulnerability.
  • Climate finance plays a pivotal role in addressing climate change by facilitating substantial investments required to significantly curtail emissions. This is especially crucial in sectors responsible for substantial greenhouse gas emissions.
  • Furthermore, it holds equal significance in adaptation efforts, as substantial financial resources are essential to enable societies and economies to cope with and mitigate the adverse impacts of climate change.

India's Stance Regarding Climate Finance

  • A Global Challenge: India maintains a strong stance that climate change represents a global collective issue necessitating solutions rooted in international cooperation and multilateralism.
  • Clarity in Definition: India advocates for precise definitions within the realm of climate finance. The absence of clear definitions can enable developed nations to obscure their financial contributions and classify loans as climate-related assistance.
  • Emphasis on Capacity Building and Technology Transfer: India calls upon affluent nations to take concrete actions concerning climate finance, technology dissemination, and the enhancement of the capabilities of less affluent and developing countries in their battle against climate change.

Challenges in Climate Finance:

  1. Unmet Goals: The UNFCCC Standing Committee on Finance (SCF) issued a report on the progress made by developed nations in reaching the target of mobilizing $100 billion annually. The report confirms that as of 2020, this goal remained unattained. Additionally, previous endeavors by developed countries to stimulate private finance were largely unsuccessful.
  2. Private Climate Finance Shortfalls: According to OECD 2020 data, the mobilization of private climate finance has fallen short of the expectations set by developed countries. Many investors view climate-focused investments as having a potentially lower social impact and reduced profitability. Moreover, while experienced investors have the means to direct their capital toward decarbonization and the energy transition, such investments often lack liquidity.
  3. Developing Nations' Demands: Developing countries have consistently argued that a substantial portion of climate finance should be sourced from public funds. They assert that private finance alone will not adequately address their needs and priorities, particularly concerning adaptation efforts. Currently, climate finance predominantly supports mitigation projects with clear revenue streams, further exacerbating this issue.
  4. Contradictory Claims: Despite emphasizing the importance of mobilizing private finance in their climate finance strategies, developed countries and multilateral development banks have not achieved the necessary scale to unlock substantial private sector investments or meet their climate ambitions.

Suggestions for Climate Finance:

  1. Private-Sector Commitment: While the public sector plays a vital role in climate financing, we must recognize the need for substantial private-sector resources to achieve scalable solutions. CoP-28 presents an opportunity to rethink how we implement market-based solutions and leverage digital innovation to expand promising models.
  2. Mobilizing Capital: The key is to create climate investments that are not only profitable but also liquid and accessible to a wide range of investors. To achieve this, we must tap into global savings from individual investors and institutions like pension funds, insurers, and sovereign funds. Retail-friendly and easily accessible instruments like exchange-traded funds (ETFs) can help diversify risks.
  3. Climate-Resilient Real Estate and Infrastructure: This involves investing in assets located in climate-resilient regions with minimal climate exposure. Real estate and infrastructure in such areas are poised to appreciate significantly due to

Conclusion

  • To build climate-resilient communities, the promotion of cross-border public-private partnerships, the securement of critical green supplies, and the accommodation of climate-induced population shifts worldwide are imperative.
  • Given the rapid escalation of climate-related costs, it becomes evident that innovation, encompassing both technological and financial advancements, remains the paramount tool at our disposal.

Probable Questions for UPSC Mains Exam

  1. Explain the terms "Greenwashing," "Greenwishing," and "Greenhushing" in the context of environmental sustainability and corporate behavior. How might these practices affect climate finance efforts, and what strategies can be employed to combat them? (10 Marks, 150 words)
  2. Analyze India's position on climate finance, emphasizing international cooperation, clear definitions, and capacity building. Discuss the challenges that developing nations encounter in accessing climate finance and propose ways to improve equitable distribution under international agreements like the Paris Agreement. (15 Marks, 250 Words)

Source – Livemint