lu_inside12-full
Create successful ePaper yourself
Turn your PDF publications into a flip-book with our unique Google optimized e-Paper software.
Inside magazine issue 12 | Part 03 - From a corporate perspective<br />
Despite the historic<br />
(and continued)<br />
importance<br />
of multilateral<br />
development<br />
banks, corporates<br />
are a growing class<br />
of green bond<br />
issuers<br />
To understand the momentum behind<br />
green bonds, we need to answer two<br />
key questions: first, why is there a move<br />
toward funding green projects at all? And,<br />
second: why has there been such growth<br />
in the climate bonds/green bonds market<br />
specifically, versus “traditional” approaches<br />
such as public sector funding and bank<br />
loans?<br />
The private sector is growing increasingly<br />
aware of the economic costs of climate<br />
change. Unilever’s Chief Executive Officer<br />
went on record last year claiming that<br />
climate change was setting his company<br />
back an astounding €300 million to €400<br />
million a year. 7<br />
In its 2014 survey of business executives,<br />
Deloitte found that, of those operating<br />
in emerging markets (in other words,<br />
countries disproportionately affected by<br />
the ravages of climate change),<br />
72 percent cited “minimizing negative<br />
environmental impacts” as an “extremely”<br />
or “very important” business concern for<br />
them, and 49 percent of their counterparts<br />
operating in developed markets said the<br />
same. 8<br />
To a greater or lesser extent, businesses<br />
thrive when they have a dependable supply<br />
of resources on which to bank, and they<br />
can grow and develop when their supply<br />
chain is sustainable. Many companies<br />
are increasingly finding that hurting the<br />
environment also hurts long-term profits<br />
and viability. In this regard, it is interesting<br />
to note that, despite the historic (and<br />
continued) importance of multilateral<br />
development banks, corporates are a<br />
growing class of green bond issuers. 9<br />
It pays<br />
The growing acceptance that the economic<br />
and non-economic case for departing from<br />
“business as usual” is solid has coincided<br />
with a greater understanding of the cost<br />
and pay-off that comes with getting serious<br />
about going green.<br />
Let’s take a quick look at some evidence.<br />
As a first step, our eva<strong>lu</strong>ation requires<br />
appreciating which sectors are the greatest<br />
emission offenders. We can then calculate<br />
how much investment would be required<br />
to make those sectors green(er). The chart<br />
below, taken from the IPCC’s 2014 report,<br />
makes it clear that the key “culprits,” namely<br />
energy, land use, industry and transport,<br />
require careful attention.<br />
1. Why go green?<br />
Business as usual is hurting us<br />
The mammoth global impact of seemingly<br />
small changes in temperature can be<br />
difficult to fathom, but it is very real. A<br />
mere 5 to 6 degrees separate current<br />
temperatures from those experienced<br />
during the last ice age. 4 The International<br />
Panel on Climate Change (IPCC)’s 2014<br />
report 5 cites, with varying levels of<br />
confidence, population displacement,<br />
violent conflict, an undermining of our food<br />
and water supplies’ sustainability, and an<br />
exacerbation of health problems as among<br />
the consequences of global warming.<br />
Global Greenhouse Gas Emissions by Economic Sector<br />
Industry<br />
21%<br />
Other energy<br />
10%<br />
Electricity and<br />
heat production<br />
25%<br />
Although measuring the economic cost<br />
of climate change has proven difficult<br />
and contentious, a recent study projects<br />
that if past adaptive patterns were to be<br />
replicated into the future, we can expect<br />
that sustained global warming will lead<br />
to a drop in average global incomes of<br />
approximately 23 percent by 2100 and an<br />
exacerbation of global income inequality,<br />
as compared to projected scenarios<br />
where there is no such climate change. 6<br />
Transportation<br />
14%<br />
Buildings<br />
6%<br />
Agriculture,<br />
forestry and<br />
other land use<br />
24%<br />
Source: IPCC 2014, cited in United States Environmental Protection Agency (EPA). Global Greenhouse Gas<br />
Emissions Data: http://www3.epa.gov/climatechange/ghgemissions/global.html<br />
100