Keynote address by ADB Vice President Ursula Schaefer-Preuss at the ChosunBiz Green Finance Forum on February 15, 2011 in Seoul, Republic of Korea
Former Prime Minister Han Seung-soo, distinguished guests, ladies and gentlemen; good morning. On behalf of the Asian Development Bank, I would like to thank ChosunBiz and its Chairman, Kang Hyosang, for inviting me to participate in this Green Finance Forum. It provides a tremendous opportunity to share knowledge and ideas about financing green growth and reshaping the sustainable development paradigm. Both are matters of great urgency and importance.
ADB has been helping eradicate poverty in Asia and the Pacific for more than 40 years by promoting sustainable development. Along the way, our developing member countries have faced many challenges, which we have helped overcome. We are now facing the most far-reaching challenge to ever confront the human race: climate change.
II. Challenges to Sustainability
With the most populous and dynamic economies in the world, the Asia and Pacific region is at the center of the global economic and environmental challenges of our time.
With each passing day, Asia's contributions to the climate change dilemma grow. The region is simultaneously becoming more vulnerable to weather extremes, rising sea levels, and other climate change-related phenomena. Poor communities, and particularly women and children, will continue to be hardest hit. Unless steps are taken today, the share of global CO2 emissions from developing countries in Asia could rise to more than 40 percent of the world's total in the next decade. This would quickly make our region the main driver of global climate change. Worsening this situation, our cities are growing too quickly, and our transport systems are unsustainable. Asia's cities will swell with an additional 1.1 billion people in the next 20 years. This growth will present already struggling local governments with the massive challenge of coping with even more air and water pollution, lack of potable water, slums, and traffic congestion.
Access to affordable and sustainable energy is an important element for poverty reduction. More than 800 million people in Asia and the Pacific still have no access to electricity. About 1.8 billion people still burn wood, dung, and crop waste for cooking and heating. This persistent energy poverty has hampered efforts to reduce poverty and meet the Millennium Development Goals. Access to modern, cleaner energy is essential to cut indoor air pollution; improve infant and maternal health, education and agriculture; and ensure inclusive, sustainable development.
Clearly, our region will be a key actor in the ultimate success—or failure—of sustainable development initiatives. The message is simple: as Asia goes, so goes the world.
III. Green Growth—The "New" Sustainable Development
Distinguished guests, ladies and gentlemen: I would like to take you back to 1987, when the Brundtland Commission defined sustainable development as "development that meets the needs of the present without compromising the ability of future generations to meet their own needs."
But the recent crisis related to 3Fs — finance, food, and fuel — has compelled us to rethink the way we are pursuing sustainable development. Combining the 3Fs with climate change, the idea of green growth emerged. Essentially, it is about embarking on a development path that will securely and sustainably promote human well-being. Critically, it should not jeopardize the environment or result in environmental risks and ecological scarcities. At its most basic, the green growth paradigm invokes us to prioritize endeavors that use less materials, less energy, less water, and less land— while emitting fewer greenhouse gases.
Though most of Asia is coming out of the 3F crisis, this should not give us reason for complacency. On the contrary, since climate change is something that will be with us for well into the future, we should be doing much more to achieve green growth. In fact, with Asia and the Pacific poised to become the greatest source of greenhouse gas emissions, we have a major role in climate change solutions. And we know we can learn much from the Republic of Korea.
The Republic of Korea has been a key leader in the green growth revolution and sets an excellent example for the international community. Your commitment to foster and promote knowledge through the Global Green Growth Institute is admirable. Of all countries, the Republic of Korea remains at the forefront of green growth policy. The "Green New Deal," which is set to invest about $44 billion in green initiatives by 2013, will provide tremendous stimulus to your national green industries.
IV. Green Finance
Distinguished guests, ladies and gentlemen: At ADB, we understand green finance as an investment or lending program that takes into account environmental impact. As a regional development bank, we have been practicing this for many years by establishing environmental and social safeguards for our investments.
What is new is that we are now financing green growth on a more massive scale. ADB's adoption in 2010 of its climate change strategic priorities provided the linchpin for this. Among others, greater investments in clean energy, sustainable transport, and urban development are reducing greenhouse gas emissions while improving quality of life. And our support for building climate resilience in the water and agriculture sectors is decreasing the risk of food crisis.
Our investments in clean energy have consistently risen, reaching $1.7 billion in 2010. This reflects the huge demand from developing Asia—much more than the public sector could every possibly address alone. From the perspective of a regional development bank, we see many opportunities for green financing.
The needs for the region over the coming decade are staggering. About two thirds of the projected infrastructure investment of up to $8 trillion will be for new Concerted action and partnerships between the public and private sectors are absolutely critical if we are to meet these massive financing needs. infrastructure. Massive investment in clean and renewable energy is also needed, as well as in wastewater treatment and sanitation, and sustainable transport. Climate change mitigation costs in developing countries are predicted to grow to well over $100 billion per year by 2030. Adaptation cost estimates for Asia and the Pacific are in the order of $40 billion annually.
The concessional funds from the public sector, which come from governments through bilateral and/or multilateral development agencies, need to be optimized.
This presents a promising opportunity to design, build, and operate infrastructure on the principle of green growth using green finance. What needs to be urgently resolved is how to best use limited public sector funds to leverage far more private capital in low-carbon and climate adaptation investments Financing partnerships are critical at both the technology innovation and deployment stages. For the innovation stage, public funding is required for early research and development, and to stimulate the movement of venture capital towards climate change and clean energy investments. Grant funding may also be used as seed money. These efforts will catalyze Asian-based start-up companies to develop or adapt technologies to local conditions. For the technology deployment phase, public funding could be used to help shoulder the initial project development costs.
V. ADB's Unique Role—Change Agent
Distinguished guests, ladies and gentlemen: As Asia assumes a larger role on the world stage, we must also assume our responsibility for addressing pressing global environmental problems. Green growth interventions must address both climate change mitigation and adaptation, while improving the environment and reducing poverty.
I am pleased to inform you that ADB has an array of projects that makes the low-carbon, green choice more feasible for developing countries. This could be through "buying down" the high upfront costs of green technologies. Or helping create the policies that will provide to the private sector incentives and accelerate true "green businesses".
Green finance can make this happen faster.
For example, we have the Asia Solar Energy Initiative that aims to catalyze greater levels of solar energy investment, and remove the barriers to commercial-scale deployment. The Quantum Leap in Wind Initiative promotes the deployment of wind power in the region.
ADB is also striving to move upstream in the technology development process. We are working to "open the floodgates" and catalyze the resources and experience of the private sector through innovative financing approaches. For instance, The Asia Climate Change and Clean Venture Initiative will use equity infusions to increase the investments of venture capital funds that can help clean technology companies in our developing countries to flourish.
As these examples show, ADB's key role in green finance is to use its limited public sector funds to leverage private capital. Partnerships will continue to be a key component of our green finance approaches. Multilateral and bilateral agencies, governments, the private sector, civil society, and local communities must all work together to disseminate more technologies, more quickly, to more people.
Numerous opportunities exist for the Republic of Korea and ADB to partner on green finance initiatives.
Distinguished guests, ladies and gentlemen: The green growth presents an opportunity to generate new, win-win situations for addressing climate change, gaining economic benefits, and reducing poverty. The Republic of Korea and ADB could use this opportunity to explore partnerships in green finance. One option could be to encourage private capital flows in clean energy and sustainable transport.
As the United Nations Framework Convention on Climate Change once said about green growth, "the most convincing argument is demonstrating that it can be done." The Republic of Korea is providing an outstanding example of this. We must not only admire you, but also follow your lead. We must not only observe you, but also partner with you. Most importantly, we must not only think about green finance, but make it a reality by working together using our comparative advantages.