CAN Position: Implications of 1.5C & Zero-Carbon Goal by 2050 on Public Finance Institutions, June 2017

Key Message and Recommendations

Under the Paris Agreement, 196 countries agreed to align financial flows with a pathway towards low-GHG, climate-resilient development. The UN Sustainable Development Goals (SDGs) of the 2030 Agenda aim for universal access to affordable, reliable, sustainable and modern energy and infrastructure by 2030. This CAN position paper outlines the role of public finance institutions (PFIs) such as Multilateral Development Banks (MDBs), other Development Finance Institutions (DFIs) and Export Credit Agencies (ECAs) in supporting countries in the zero-carbon, climate-resilient transition. The paper urges that:

• Public finance must be transformational, catalytic, inclusive and responsive;
• PFIs must apply precautionary principles in assessing the climate and development impacts of their policies and projects avoiding harm to people, nature and economy;
• PFIs must provide policy, technical and financial support to help countries transform their energy sectors to sustainable, efficient systems that prioritise energy access;
• PFIs must cease by 2020 direct, indirect, ancillary infrastructure and policy support for upstream and downstream fossil fuels, GHG-intensive projects, nuclear, large bioenergy and hydropower when more cost-effective and less damaging alternatives exist;All PFI investments must meet strict environmental and social development criteria and be assessed through a pro-poor, inclusive, climate-resilient and gender-responsive lens;
• All PFIs, beginning with OECD countries in 2017, should report annually on their progress in scaling back support for fossil fuel-related transactions.

This paper identifies a number of opportunities for PFIs:

• MDB country strategy revision processes provide an opportunity to integrate Nationally Determined Contributions (NDCs) and long-term strategies (LTS) for zero-carbon development under the Paris Agreement;
• Policy reforms lending can be strategically influential to usher in urgently-required energy and infrastructure sector policy reforms;
• Strengthening oversight over their financial intermediaries’ compliance with environmental and social frameworks, as well as gender and energy policy provisions would significantly reduce impacts on ecosystems and society by PFIs;
• The results framework for PFI energy investments could incorporate outcome indicators for alignment with the 1.5°C goal and the 2030 Agenda SDGs;
• All PFIs should initiate reports to present pathways for their operations to contribute to sustainable energy and development commitments of their stakeholder governments.

CAN calls on all PFIs to produce pathways to 1.5°C and Agenda 2030 for their respective operations by 2020 based on a synthesis of scientific advice and an assessment of social and economic development needs.

Note: This position paper is supported by more detailed analysis in a companion document.

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Download file: http://public_finance_institutions_1.5c_position_paper.pdf