Climate finance and the path to green transition

Climate finance and the path to green transition
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The Nordic Region has long played a leading role in climate finance, helping fund green projects all over the world. In recent years, as the evidence has mounted that green transition has socioeconomic benefits and that preventive climate measures are less expensive than retrospective repairs, climate finance has moved to the top of the agenda, a fact reflected in Nordic policy, in business practices and the financial sector.

When UN global climate negotiations resume in Morocco next week, solutions relevant to Africa will be a major topic. In spring 2016, the Nordic Development Fund (NDF) took the strategic decision to acquire a stake in the African Guarantee Fund (AGF), which provides finance for small and medium-sized enterprises (SMEs). The NDF investment will help raise the profile of AGF in green growth and climate-resilient development throughout the continent.

By channelling funding via SMEs, NDF and AGF promote sustainable development and makes an impact all over Africa in sectors such as renewable energy and energy efficiency, cleaner production, climate-smart agriculture and sustainable management of natural resources.

However, Nordic expertise in green growth is not restricted to financial acumen. The Region has made greater progress than most other parts of the world in the transition from fossil fuels to low-carbon energy sources. The IEA has noted that the Nordic countries are "frontrunners in decisive policy actions towards clear, long-term energy targets - including the establishment of interconnected grids and a common, liberalised power market". The UN has also acknowledged the many innovative Nordic breakthroughs in fields such as solar power, water pumps, irrigation systems and water purification in poor rural areas in low-income countries.

Energy is another sector in which Africa has gained from Nordic funding and expertise. They could not be further apart, but the integrated Nordic electricity market, Nord Pool, served as the inspiration for the Southern African Power Pool (SAPP), which involves twelve of the member states in the Southern African Development Community.

But back to green enterprise. Starting on a small scale is fine - investing in SMEs is an effective and redistributive approach - but it is important to be bold and to think long term. The team behind SAPP found that, even though it cost more to feed renewable energy sources into the system than fossil fuels or nuclear power, the return on investment - in the form of fuel savings, less need for investment in transmission and distribution, etc. - would far exceed the additional investment.

This is where development funds like NDF come into the picture. Access to finance remains a critical constraint on growth for African SMEs. When the will is there and the decision already taken, development funds play a significant role in helping companies, communities and countries over the investment threshold. They are also in a position to steer funding in a greener direction.

The United Nations Climate Change Conference, COP22, begins on Monday in Marrakech. It is an opportunity for the world community to come together and encourage politicians, ordinary citizens, producers and consumers alike to push for the implementation of the targets set out in the Paris Agreement. For the sake of the planet and humanity, it is my fervent hope that the negotiations will be conducted in a spirit of determination to find solutions and constructive long-term approaches, including for the crucial, long-term role played by development funds.

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