Developing infrastructure fit for the future while simultaneously achieving climate goals? With green bonds, that is possible. Green bonds are an important instrument for financing environmentally friendly projects. In South Africa, a cooperation with the United Nations Environment Programme is showing how climate protection, fighting poverty and growth can go hand in hand.
Value for money, climate change mitigation and social inclusion are not necessarily contradictory, but can mutually reinforce one other. The green economy concept shows that large sections of the population can benefit from climate change mitigation measures. South Africa has been pursuing this approach for nearly ten years and is considered internationally to be a pioneer. In particular, financing is an essential aspect: The Government of South Africa wants to make greater use of green bonds as a means of attracting capital for sustainable investments.
In this process, the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH is supporting the country, together with the United Nations Environment Programme (UNEP). UNEP, GIZ and their South African partners are also cooperating in promoting green jobs and the circular economy. UNEP’s global knowledge and the practical experience gained by GIZ in its projects around the world feed into this work at national level.
Sustainable infrastructure projects receive funding
UNEP and GIZ have been cooperating since 2019 on a project for green economic reform in South Africa, building on proven partnerships. The project is funded by the Internationalen Klimaschutzinitiative (IKI) dof the German Federal Ministry for the Environment, Nature Conversation and Nuclear Safety (BMU). As a driving force for environmental protection globally, UNEP has the ear of national governments and it works together with various UN organisations to pool expertise across sectors and offer it from a single source. Thanks to its many years working in the country, GIZ has a large network and cooperates with local partners on the ground. One such partner is Dr Jenitha Badul from the South African Ministry of Environment, Forestry and Fisheries (DEFF), who has been working in the green economy for many years. South Africa benefits from its cooperation with GIZ and UNEP, above all through advisory services that are supporting the country on the path to a sustainable economy. As Dr Badul explains, ‘The green economy interventions are also cognizant of advancing MSMEs, gender equality and youth development and the scope for new and emerging markets through relevant GE interventions.’
Green bonds allow local authorities to develop green, low-carbon infrastructures on a large scale and to strengthen the country’s economy at the same time, by attracting external investment. This is an advantage, especially in times of crisis, such as the current coronavirus pandemic. As green bonds provide funding for public projects, the state and local authorities have more resources left over to invest in economic recovery measures and in addressing pertinent issues related to the company’s developmental agenda.
In South Africa, there is already such a strong interest in green bonds that, together with UNEP, GIZ has been able to attract another United Nations programme as a partner: „Poverty Environment Action“
(PEA). This is a cooperation arrangement between UNEP and the United Nations Development Programme (UNDP), which combines poverty reduction and environmental protection measures. PEA provides additional financial and technical support to the South African Ministry of Environment, as well as to the cities of Durban (Ethekwini Municipality) and Pretoria (City of Tshwane). The partners in the programme are developing a manual on green bonds for South Africa’s cities and providing training for municipal employees.
The successful cooperation in South Africa could, in the future, serve as a model for other countries. For example, GIZ, PEA and UNEP are planning exchanges between South Africa and Indonesia to promote sustainable financing. It is the ideal moment to do so: South Africa has prepared a taxonomy catalogue for green bonds, which is to be published in early 2021. Indonesia already has many years of experience with green bonds. As such, South Africa has the opportunity to learn from Indonesia and in so doing, benefit through the partnership.
Green Economy provides solutions for the challenges in the 21st century
GIZ and UNEP have been working together successfully since 2011. Back then, the green economy was little more than a written concept. Today, UNEP advises countries all around the world on this subject, as part of the UN’s alliance for sustainable economy, the Partnership for Action on Green Economy (PAGE). It is also implementing projects together with GIZ. But what is it that distinguishes the cooperation between the two organisations? We asked Steven Stone, Head of the Resources and Markets branch at UNEP, and Vera Scholz, Director of GIZ’s Climate Change, Environment, Infrastructure Division.
1.) Where do things stand today with the concept of the green economy, both in individual countries and in international cooperation?
Steven Stone: The green economy concept has come a long way. In the wake of the 2008 financial crisis, UNEP published a paper called the Global Green New Deal, which made a case for enhancing economic recovery and creating jobs with green stimulus packages. Since the Rio+20 conference in 2012, countries across the globe have adopted the concept at national level. The PAGE initiative, founded by UNEP, now supports 20 countries. The („Green Growth Knowledge Partnership“) Green Growth Knowledge Partnership is an important platform for the green economy. It connects knowledge and experts all around the world. Twelve years later, the concept has not lost its appeal. The EU’s Green Deal and the current debates on green recovery packages to overcome the COVID-19 crisis show that a green economy is well positioned to provide policy solutions to the challenges we face in the 21st century.
2.) What role does international exchange with other partners play for GIZ and UNEP in this process?
Vera Scholz: The exchange is essential, for example, with regards to green financial policy, which is an important building block for the green economy. This entails states using their public revenues and expenditure as a lever for change, for instance applying environmental reforms in taxation and subsidies. To this end, together with the International Monetary Fund, GIZ and UNEP set up the Green Fiscal Policy Network in 2014 to encourage international exchanges in this area.
3.) How do UNEP and GIZ complement one another and what are the advantages of your cooperation in this project?
Steven Stone: The joint GIZ-UNEP Green Economy Transformation project combines the strengths of both organisations – GIZ’s strong country presence and close working relationships with governments, and UNEP’s convening power and normative voice on the environment. Since the start of the collaboration in 2011, we have been building great synergies.
Vera Scholz: An important point, which benefits GIZ, in this cooperation is that we work very closely with our partner project on the ground. This means we enjoy great proximity to those partners and we can provide complementary support.
4.) What are the next steps for the Green Economy Transformation project? To what extent can other countries learn from the experience in South Africa?
Vera Scholz: We will continue to develop our cooperation with UNEP and the other UN partners in PAGE. In South Africa, we are already working with UNEP and the International Labour Organization to promote a dialogue process to counter youth unemployment with targeted economic stimulus measures.
Steven Stone: The important thing to note is that transitioning to a green economy and achieving the Sustainable Development Goals will require investments that benefit the environment, society and the private sector alike. Stretched public budgets, especially after the COVID-19 stimulus packages, can benefit from innovative sustainable finance mechanisms that leverage private sector investments. South Africa has already been issuing several municipal green bonds. Such kinds of experiences are inspiring for other countries that look into similar mechanisms. UNEP has an important role as a multiplier to support this exchange of knowledge.
Source: Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), November 2020