Flipping Climate Finance on Its Head
A s advocates and innovators of planetary regeneration, Regen Network was honored and humbled to be part of Caux Forum for Land and Security 2018. Over the duration of this event, Brian Weinberg and I worked with an international contingent of private and social sector leaders to consider the current state of climate finance and how financial and technological innovation may move us toward greater impact.
About the Caux Forum
“In 1946, around one hundred Swiss families and individuals purchased the former luxury hotel Caux-Palace, which had gone bankrupt and served as a home for internees and refugees during World War II. The Caux-Palace became a conference centre where the annual summer Caux Conferences, now renamed the Caux Forum, were kicked off to bring together nations which had been divided.
This international conference centre has since played an important role in the post-World War II reconciliation in Europe, between individual citizens as well as countries such as France and Germany, in the decolonization processes of Tunisia and Morocco and elsewhere, in the relationships between industrialists and workers, and other peace processes.” — Initiatives of Change
Initiatives of Change now organizes a broad range of events, including the annual Caux Forum. This year’s Dialogue on Land and Security had a particular focus on climate finance — specifically, exploring innovative ways of stimulating more financial investment into climate adaptation and resilience. Elizabeth Kucinich extended the invite to our team, as she believes that Regen Network plays a key role in offering a transparent and low-cost set of tools to reversing global warming.
Climate Finance: The Challenge of Metrics
The Climate Policy Institute estimates that there is currently about $383 billion invested into climate related projects annually, with the vast majority of that coming from the private sector. And meanwhile, the World Economic Forum estimates that we will need about $5.7 trillion annually by 2020 if we are going to rise to the climate challenge with adequate resources. To put that in perspective, there are about $80 trillion in the world’s stock markets (and over $500 trillion in the derivatives markets according to Market Watch), so that $5.7 trillion is not inconceivable.
There are two broad categories within which climate related investments can be made:
- Mitigation
- Climate adaptation and resilience
According to research by the African Development Bank, 95% of all climate-related investments are put toward mitigation, which are defined as those investments aimed at reducing the total amount of CO2 released into the atmosphere annually. These investments primarily go into renewable power, manufacturing efficiency upgrades, avoided deforestation, and forestry projects. These mitigation-related investments are attractive to investors and funds because it is easy to quantify and predict the returns on investment, both financially and environmentally.
The problem is that despite the economic predictability of these instruments, they are also predictably much less beneficial to the local communities and habitats in the areas of implementation.
Climate adaptation and resilience on the other hand is generally understood to be far better (an order of magnitude better) for the families, communities, and ecologies on the ground — but the benefits tend to be harder to quantify. This category of investment receives only about 5% of all climate related funds. Examples of climate adaptation and resilience include investments into ecological agriculture, community scale processing facilities, and local ecosystem rehabilitation. These types of project have a broad set of benefits for the local communities and ecosystems, and generally produce far fewer negative externalities than mitigation investments.
The challenge for the international climate finance community is finding innovative ways to structure and understand the relative complexity of the outcomes of the adaptation and resilience investments, while still returning the financial return that investors are seeking.
Blockchain for Financial and Ecological Accounting
One of the biggest challenges of investing in climate adaptation and resiliency is financial and ecological accounting, so that the various parties involved track and understand the impact of their investments. Using distributed ledger technology, projects like Regen Network offer the international community an innovative approach that reduces inefficiencies, removes the opacity of money flow, decreases corruption, and tracks and rewards the positive outcomes achieved on the ground. In addition to this increased transparency and ease of accounting, results-based mechanisms protect both investors and practitioners by activating the additional asset class of Ecosystem Services. The value created makes economic and ecological sense for both investor and farmer.
For the first time, it is possible to engage large and small farmers around the world with financing that enables them to make positive changes to their land while clearly and transparently tracking the ecological and financial returns from this investment. This is well reflected in the Caux Dialogue on Land and Security 2018 Round Table Declaration.
Over the course of the week, the deep discussion on climate finance reinforced my belief in the value proposition Regen Network is developing. Equipped with our platform, the world’s farmers can and will be economically incentivized to improve their land; and the world of climate finance can and will finally be able to unlock the incredibly powerful investment potential of climate adaptation and resilience.
