According to the “Green Economy Report” of the United Nations Environmental Programme (UNEP), an investment of 2% of the annual global GDP is necessary in order to enable the fundamental transition towards a greener economy based on sustainability and resource conservation. However, large sums of money continue to be poured into unsustainable projects.
There is wide consensus that investment strategies, including those of personal interest, should integrate environmental, social and corporate governance issues. Despite this, billons of euros are still being funnelled into projects of the “Old Economy”. These are mostly planned for short term benefits, where the ecological and social consequences of their actions are not taken into account.
In order to change this, as early as 2003 the United Nations Environmental Programme (UNEP) initiated a global partnership with institutions in the private financial sectors. Now, almost a decade later over 200 financial organisations from several global sectors, including banking, insurance and investments, are members of the Finance Initiative (UNEP FI). The aim of the initiative is to integrate environmental protection and sustainability into the services of the financial sectors and to encourage investing in green technology. According to UNEP, 2% of global GDP is needed to make a significant difference.
For the Green Economy to be effectively implemented, substantial investments in resource efficient technologies, infrastructure projects, new mobility and energy supply concepts, and training and research will be needed. Financial service contractors, such as banks, associated companies and insurance companies, play a decisive role: they have financial resources at their disposal and decide whether or not capital flows into sustainable projects.
“A successful Green Economy needs financial service contractors that besides the benefits also take into consideration social and ecological added value and see themselves as catalysts of change”, says Ivo Mulder from UNEP-FI. A crucial factor in addressing the upcoming challenges is company and investment specific risk management: “The 21st century will look differently. The shortage of natural resources, access to water, the destruction of ecosystems and climate change are phenomena that the financial institutions must systematically take into account in their credit and investment products – and this in the economic self-interest of the financial sectors.”
The German Investment Corporation (DEG), a sister company of the KfW, has shown how financial institutes can invest successfully in sustainable initiatives while at the same time earn money. The DEG is committed to entrepreneurial initiatives in developing and emerging nations that observe environmental and social standards and whose work has a positive impact on locally-implemented development policies.
“With our equity participation we are deliberately running higher risks and encouraging promising businesses. The subsequent sale of shares often makes for good earnings, which in turn allows for further financing. DEG’s pivotal point is to drive forth long lasting, successful and sustainable investments. A good example is the long-standing cooperation with SEKEM-Group”, says DEG Business Unit Manager, Manuela Marques.
SEKEM is known as the first “social business” in Egypt. Through its involvement with DEG it has become the market leader in organic agriculture and an employer of 2,000 people. SEKEM’s Managing Director, Helmy Abouleish, and Manuela Marques from DEG will talk about their experiences at this year’s sustainability conference, SusCon 2012, which will take place on November 27th-28th in the UN city, Bonn.
The goal of SusCon 2012 is to develop concrete measures for the establishment of a viable “Green Economy”. SusCon will reveal how the 2% of global GDP calculated by the UNEP can be reached. Therefore, Abouleish and Marques together with the conference participants in the SusCon session “Sustinable Financing” will tackle the following tasks:
1. Identify both the choke points and the solutions in order to establish guidelines for responsible investment, credit and insurance.
2. Clarify whether governments should regulate the financial sector to the effect that social and ecological minimum standards are met.
3. Clarify how micro financing can be applied with mutual advantage to poor and rich national economies.