UN Climate Action Summit 2019. Credit: Loey Felipe
The UN General Assembly began on 23 September 2019 in New York City with a major climate summit, attended by over 100 world leaders. The summit comes just one week after a New York City-sanctioned school climate strike and a UN Youth Summit, which featured Greta Thunberg, the 16-year-old Swedish climate activist.
On the other side of the pond, Rory Stewart (then UK Secretary of State for International Development) recently announced the largest single direct aid investment in climate and the environment across Africa. At the summit, the UK announced it will double its investment to help developing countries combat climate change.
Pressure is mounting on both businesses and governments to act upon the climate crisis. The business case for sustainability – including environmental sustainability and climate risk management – has never been stronger. Thanks to a rising public demand and environmental awareness, the public and private sectors have a perfect opportunity to align around environmental sustainability and put this at the core of their operations. Here are three opportunities for the private sector to take a leading role:
Improving resource efficiency and reducing waste from core operations is the closest thing many companies have to a "quick win". Marks & Spencer launched a plan in 2007 to integrate sustainable practices into their strategy and operations. It promoted sustainability in logistics, energy consumption, packaging, and waste reduction, and in fiscal year 2015/2016 alone, Marks & Spencer realised almost GBP 200 million in net benefits from this strategy.
Between 2008 and 2017, the company moved from 69% of its waste going to landfills to close to 0% for all its UK operations. By 2015, it reduced its clothing and home transit packaging waste by 25% and reduced its water usage by 27%.
Nespresso launched a USD 600 million program to plant 10 million trees across Nicaragua, Mexico, Guatemala, Colombia, and Ethiopia with the aim of achieving carbon neutrality by 2020. Nespresso also focused on its supply chain, providing its farmers with better quality crops, increasing their revenues, and improving the ecosystem of the communities from which it sources raw materials. This allows Nespresso to make a positive environmental impact while also increasing the quality of its product, benefitting everyone from its farmers to its consumers.
Climate Finance and Sustainability Bonds
"Solving these problems of deforestation and climate change will require huge amounts of private sector capital," says Will Upshur, Palladium's Senior Manager of Commercial Innovation, "and it has distinct advantages over donor and government capital, both of which are subject to political winds."
This is where climate finance comes in. Presenting an opportunity for public-private collaboration, climate finance has the capacity to de-risk investments on a large scale and increase capital flows into climate-friendly business models and technologies. There are several innovative climate finance approaches being pursued and tested, including the world's first corporate sustainability bond.
In January 2018, this sustainability bond was launched in Indonesia, issued by the Tropical Landscapes Finance Facility (TLFF), a partnership between UN Environment, ADM Capital, and more. It funds the PT Royal Lestari Utama (RLU), an Indonesian joint venture between France's Michelin and Indonesia’s Barito Pacific Group for "climate smart, wildlife friendly, socially inclusive production of natural rubber" sourced from Indonesia. USAID provided a partial credit guarantee.
Transitioning from Public to Private Sectors
The public sector has traditionally been the main actor addressing climate change, and there are still fundamental contributions to make, including:
The public sector, including international development and aid, can test concepts, lead projects, use instruments like grants and concessional loans, and develop investible business models that attract private capital.
On a global basis, we will need to figure out how to meet our needs across countries and societies without continuing to jeopardise our finite resources. This transition requires a systemic approach that no one sector can do alone. "As we've seen during the UN's Climate Summit, these are issues of primacy for stakeholders all over the world, including corporations, their employees, their customers, and indeed even their shareholders," says Upshur.