ENVIRONMENT: Financial Pillar Key to Sustainability

By Mario Osava Reprint | | Print |

Mario Osava

RIO DE JANEIRO, Mar 15 2002 (IPS) - The environment and finances come together to create a market with a brilliant future, but one that for now remains merely a promise and a challenge, according to a two-day international meeting on the issue that ended Friday in this Brazilian city.

The aim of the annual Global Roundtable of the United Nations Environment Programme’s (UNEP) Financial Institutions Initiative is to encourage banks and insurance companies to become active participants in the search for solutions to environmental problems.

Little progress has been made towards achieving sustainable development over the past decade, especially due to rich countries’ failure to live up to their pledge to earmark 0.7 percent of Gross Domestic Product (GDP) to aid to developing nations, said Brazil’s Environment Minister, José Carlos Carvalho.

Instead of increasing, official development aid (ODA), which averaged 0.33 percent of GDP in the industrialised world in 1992, fell to 0.22 percent in 2000, noted Everton Vargas, director of of the Brazilian Foreign Ministry’s Department on the Environment.

Ten years ago, when the United Nations Earth Summit approved Agenda 21 in Rio de Janeiro, the cost of the actions needed to promote sustainable development as laid out by the document was estimated at 600 billion dollars.

Of that total, 125 billion were to come from ODA from industrialised countries, Vargas pointed out.

But that goal was not met, nor was the foreign debt burden of poor countries – some of which are facing “unbearable situations” – eased, he added.

Vargas said he hoped some progress towards increasing ODA would be seen at the Mar 18-22 International Conference on Financing for Development convened by the United Nations, which will draw around 50 heads of state and government to the northern Mexican city of Monterrey.

The results to come out of Monterrey and the outcome of the first phase of the new round of World Trade Organisation multilateral trade talks will determine the outcome of the Rio+10 global conference on the environment, to be held Aug 26-Sep 4 in Johannesburg, South Africa, said the Brazilian official.

Besides certain financial conditions, sustainability also requires that poor countries suffer less disadvantages in trade, and that technologies to which they have limited access today be made available to them, said Vargas.

The frustration expressed by Brazilian officials regarding the scant progress made towards meeting the goals and agreements reached at the 1992 Earth Summit contrasted with more upbeat speeches heard at the Roundtable, which highlighted the new business opportunities that environmental issues are generating for the financial sector.

The question of climate change has already given rise to a number of initiatives, even before the Kyoto Protocol has gone into effect, with the creation of mechanisms for trading greenhouse gas reduction credits.

The imminent ratification of the Kyoto Protocol by the 55 countries needed for it to enter into effect has accelerated the creation of the “carbon market”, which will represent billions of dollars in business using greenhouse gas reduction credits and clean technologies and services, in which the financial sector will play a key role.

For example, the Andean Progress Corporation (CAF) – the financial arm of the Andean Community trade bloc – has already begun to implement a Latin American Carbon Plan to finance projects that reduce greenhouse gas emissions, thus generating credits in the new market, reported the institution’s executive vice-president Luis Enrique Berizbeitia.

A Dutch programme has already acquired 32 million dollars worth of credits to be generated by a wind power plant in Poland, a hydroelectric plant in Romania, and the use of biomass in the Czech Republic, said Lucas Assunçao, United Nations Conference on Trade and Development (UNCTAD) coordinator of climate change and biotrade projects.

Japan’s Development Bank showcased best environmental practices it is financing in that country, such as the Taiheyo cement plant, which puts a high priority on recycling and makes use of urban waste.

Growing environmental awareness is also giving rise to new opportunities for insurance companies, which have modified their risk evaluations. The environment, with its risks and its requirements, is more and more present in the insurance business, said Carlos Joly, with the Norwegian company Storebrand.

The new markets opened up to banks and insurance companies by environmental issues are profitable, agreed the Roundtable participants, who noted the growing need for large corporations to cultivate a socially and environmentally responsible image to avoid losses caused by damage to their reputations.

The Financial Institutions Initiative, founded in 1992 to engage banks and insurance companies in dialogue on sustainable development, organises several regional and global meetings every year.

This year’s Roundtable, “Financing a Sustainable Future: Strategies, Partnerships and Opportunities….on the way to Johannesburg 2002” – the first held in a developing country – will send its recommendations to the Monterrey and Johannesburg international conferences.