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Climate Finance

Published on: Nov. 16, 2022, 10:31 a.m.
Climate philanthropy: building bridges
  • Equity must guide climate strategies: With India’s climate commitments set at 45 per cent GHG emissions reduction by 2030, decarbonisation is a priority; Photo: Shutterstock

By Padma Venkataraman. The author is Communications Associate, India Climate Collaborative

India will have to look to a variety of funders – public, private and international – to address its considerable climate finance deficit. In such a scenario, the solution could well be climate philanthropy.

For the past few months, global and domestic media have been flooded with speculations about the 27th United Nations Climate Change Conference, ie COP27. Developing countries across the Global South are strongly pushing for increased climate finance from developed countries at Sharm El Sheikh, Egypt.

Significant items on the agenda for COP27 include funds for climate resilience; adaptation and mitigation in developing countries; compensation for loss and damage suffered in several developing countries due to climate change and appropriate international financing mechanisms. Although we don’t need to get into the complexities of international legal frameworks, the running theme is clear — developing countries do not currently have access to adequate funding to deal with the impacts of climate change. 

India, like other developing countries, is faced with the unprecedented challenge of accounting for climate concerns within its growth narrative. Following India’s intensified climate commitments at COP26 in Glasgow, Scotland, the Union Cabinet in August 2022 updated its Nationally Determined Contributions (NDCs).

India now aims to be net carbon zero by 2070 and cut the emissions intensity of its GDP by 45 per cent by 2030. To achieve these ambitious emissions targets by 2070, India requires an estimated additional $1.4 trillion in foreign financial support. India has also demanded $1 trillion over the next decade from developed countries, making its NDCs conditional on the availability of such climate finance. 

Although developed countries had promised to mobilise capital of $100 billion a year towards developing countries, they have, till date, failed to provide the requisite finance, or enable technology and knowledge transfer for climate solutions. The Covid-19 pandemic, Russia’s war against Ukraine, restrictive amendments to the Foreign Contribution (Regulation) Act 2010, and the perceived remote nature of climate change, have all further stifled sustained international climate finance in India. This climate finance deficit could grossly hinder India’s ability to meet its global commitments and ensure equitable climate-integrated development.

India also does not have the required funds to meet its UN SDGs by 2030, and is, in fact, over-reliant on government expenditure for social sector funding (with 93 per cent in 2020), leaving us increasingly reliant on private capital for climate finance. As of 2019-2020, the private sector accounted for over 57 per cent of climate finance in India, that is, Rs1,75,000 crore. With the International Monetary Fund downgrading India’s projected GDP to 6.8 per cent for 2022 the spotlight is now on how India fulfils its climate commitments while maintaining its growth.

India will have to look to a variety of funders – public, private and international – to address this finance deficit. In these circumstances, philanthropy, particularly domestic family philanthropy, could catalyse increased investment from public and private funders, by placing the spotlight on appropriate climate solutions, while international investment slowly ramps up. 

 Why domestic philanthropy is particularly suited to catalytic climate action

With low priority for a return on investment, flexibility in spending and its inherent compassionate nature of giving, philanthropy is most suited to undertake long-term catalytic investment in the climate space. Although India was the largest recipient of international philanthropic funding till 2015, this fell nearly 30 per cent between 2016 and 2021 due to increasing regulatory barriers, and is likely to be further restricted in the coming decade. Further, these international initiatives have often favoured non-profits in states like Delhi, Tamil Nadu, Odisha, etc, due to visibility and lack of local support in or knowledge about other states.

  • Climate-proofing structures is the need of the hour: According to the Council on Energy, Environment and Water’s 2021 study, over 75 per cent of India’s districts are vulnerable to extreme weather events; Pix: Shutterstock

    Mohanty, Abinash and Shreya Wadhawan. 2021. Mapping India’s Climate Vulnerability: A District-Level Assessment. New Delhi: Council on Energy, Environment and Water

Domestic philanthropy, on the other hand, offers great potential to highlight sustained climate action in all states – including those that do not attract international investment, but are particularly vulnerable to the effects of climate change. With some catalytic help from philanthropists, states like Jharkhand or Assam may finally get the investment and innovation they need to transition to low-carbon economies and integrate climate resilience into disaster response efforts.

Over the last 50 years, India has suffered a loss of over $99 billion in extreme climate events, including disasters. Reflecting this, family philanthropy’s highest priority after education is now disaster relief, dramatically rising from 7 per cent in FY2020 to 15 per cent in FY2021. Although family philanthropy contracted between 2016-2022, the sector is predicted to grow between 12 per cent and 14 per cent per year until FY2026, with the increasing wealth of technology innovators and Now Generation Philanthropists (NGPs). 

The climate sector is characterised by difficulty in impact measurement, a delayed time period for tangible outcomes and the large scale of projects, as compared with legacy sectors. However, with expertise across legacy sectors like livelihood, healthcare, education, agriculture, etc, domestic philanthropic initiatives are uniquely advantaged to shift funding priorities towards climate-integrated development.

While climate philanthropy cannot remotely address the finance deficit, it can play a catalytic role and mobilise increased green capital from the public and private sectors. In this way, philanthropy can help shape climate priorities by drawing attention to climate technological innovations and climate education, for adaptation, mitigation and resilience, while accounting for equity in India’s economic growth.

NGPs, in particular, are already gravitating towards innovative solutions that carry risk, reflecting an increasingly entrepreneurial spirit and a learning mindset. While most philanthropists may not have prior experience in the climate space, they are invested in communities they work with who are most vulnerable to climate change. This could counter the perception of climate change as a ‘tragedy of the commons’ or merely a global problem, and instead create opportunities for localised, scientifically accurate, and culturally acceptable climate solutions across India. 

How private philanthropists can help shape inclusive climate priorities

To highlight the potential of climate philanthropy, the India Climate Collaborative catalysed nearly Rs45 crore in investments from over 30 domestic and international partners by identifying 25 fundable climate solutions in 2021. In India, philanthropists are starting to integrate climate solutions into sectors such as energy, housing, agriculture, and livelihoods. However, for climate finance to make its way into all development work, private/family philanthropy must now fully realise its potential for climate-integrated development. This is important for three reasons.

One, private philanthropists who are invested in the development sector are best placed to build climate resilience into their existing programmes. Philanthropists can immediately pursue climate-integrated development, supported by the government’s policies linking legacy sectors and climate change. They can, meanwhile, explore separate grant-making portfolios for mitigation or adaptation actions, like carbon sequestration, that require more technological innovation.

For example, philanthropic initiatives that have a strong local presence in Maharashtra could align themselves with climate action plans for 43 AMRUT cities in the coming decades. Their grant-making will have to incorporate the state government’s climate priorities in disaster response or rural transformation verticals, building resilience and climate governance into legacy sectors. 

  • Philanthropists can highlight collaborative models for development: Urban resilience requires effective sanitation systems, which account for sanitation workers, circular economies and consumer behaviour; Pix: Shutterstock

Climate-integrated approaches to legacy sectors could also push the government to pay more attention to climate concerns with shorter timelines, such as climate-induced migration caused by flash floods or erratic rainfall. The Migrants Resilience Collaborative, powered by non-profits and foundations such as Jan Sahas and the EdelGive Foundation, presents potential for leading philanthropists to pay attention to sectoral intersections – of livelihoods, climate change and displacement. Such initiatives could, in the long run, ensure that philanthropic efforts target a wider range of solutions and are not limited to the emissions-energy narrative that dominates global platforms.

Two, private philanthropists have the added advantage of a network of local partners even in remote states – from central and state government departments, to consulting and implementing organisations. A shift in funding priorities of trusted philanthropists could act as a signal to the climate sector and partner organisations – building potential for increased public-private partnerships, and diverse leadership. This could highlight the collective power of communities, encouraging a shift away from the top-down policy approach often prevalent in national climate discussions.

Finally, the proximity or relationship between domestic philanthropic initiatives and their corporate counterparts could encourage consistent approaches to climate solutions, within businesses. To illustrate, Rainmatter Foundation’s work on environmental conservation and sustainable livelihoods reflects Zerodha’s corporate commitments to climate change and the environment.

Climate philanthropy and related corporate counterparts can thus sensitise each other to the urgency of weaving sustainability into businesses. In the long run, this can improve climate change governance, cut emissions and strengthen climate-related financial disclosures – aligning business objectives of corporate GHG emitters with climate metrics set by Climate Action 100+. 

The development of climate-conscious and consistent business leadership may also prove vital to public sentiment about the role of businesses in a changing world. Across the world, including in India, communities and activists are protesting against unsustainable practices of corporations – including fossil fuel companies, unethical fashion brands, e-commerce companies with unsustainable supply chains, etc.

Climate philanthropy could potentially build a bridge between where Indian businesses are today and how they can evolve to be climate-conscious, for sustainable and equitable growth. 

Can private philanthropists enable climate-sensitive policymaking?

While the future of private climate philanthropy is exciting, a conducive domestic policy environment is required to realise this potential. An ecosystem that prioritises climate finance, technological innovation, and related service delivery programmes could allow philanthropists to contribute meaningfully to climate mitigation and adaptation actions.

One way forward is through bilateral alliances such as the Climate Action and Finance Mobilisation Dialogue (CAFMD), launched in 2021 as a part of the India-US Climate and Clean Energy Agenda 2030 partnership. The CAFMD encourages the US government to attract capital, to be mobilised towards bilateral energy investment and 450 GW of renewable energy development in India. 

Similarly, the Climate Budget 2022-2023 for Odisha prioritises climate finance and programme expenditure in achieving the NDCs set by the central government under its State Action Plan for Climate Change (SAPCC). Mumbai’s Climate Action Plan 2022 envisions sector-specific strategies for mitigation and adaptation, including electrification of public transport, which is likely to attract significant climate finance from philanthropists in Maharashtra in the coming years.

The Union Ministry of Environment, Forest and Climate Change (MoEFCC) is also pushing states across India to strengthen their respective SAPCCs in view of the upcoming COP27. Initiatives like these show that governments, both central and state, are starting to create policy ecosystems that enable fund flows towards climate solutions. Yet, whether private philanthropic giving actually manoeuvres its way towards these collaborations remains to be seen.

  • The ripple effects of equity in energy: By supporting service delivery programmes under the government’s renewable energy missions, philanthropists can pave the way for villages to follow India’s 1st solar powered village - Modhera, in Gujarat

With the understanding that India’s development challenges may require a modified approach to decarbonisation, the Shakti Sustainable Energy Foundation’s Electric Mobility Initiative illustrates the power of philanthropists in supporting policymakers to tackle urban transportation’s contribution to emissions.

The Foundation has collaborated with industry and policymakers to create policies that support an Electric Vehicle (EV) manufacturing ecosystem, and increase mobility across transportation sectors. If climate philanthropy’s role in diplomacy is prioritised, private philanthropists can lead change by defining equitable climate priorities for India.

Furthermore, for philanthropists to put climate change at the heart of their development work, they will need sector-specific insights and tools to evaluate funding opportunities, and trusted networks of partner organisations. In April 2022, Bloomberg Philanthropies launched the Climate Finance Leadership Initiative (CFLI), Colombia, to mobilise domestic and international investment and transition to a low-carbon economy.

This will help Colombia realise its renewable energy potential and achieve carbon neutrality by 2050. CFLI reflects Bloomberg’s deliberate partnership with stakeholders who can provide the necessary data and expertise to mobilise capital effectively. While such initiatives by philanthropists are yet to kick off in India, initiatives like the National Institute of Urban Affairs’ ‘Climate Centre for Cities’ and (NIUA C-Cube) and the World Resources Institute India’s ‘India Forum for Nature-Based Solutions’ could highlight the catalytic role philanthropists play in climate finance.

 Climate solutions present entry points to sustainable and self-reliant development

In order to achieve its target of 45 per cent reduction in emissions by 2030, India needs up to $500 billion in the next few years. Recognising that self-reliance is healthy in an era of global uncertainty, the Indian government has started directing its focus towards climate solutions. The government’s growing efforts highlight significant entry points for private and international capital, as well as for philanthropists who seek to diversify their grant-making portfolios. 

One such entry point that aligns political, philanthropic, and climate priorities is renewable energy. With India’s big climate goals, the draft National Electricity Plan, 2022, and decades of climate technological innovation, policy and market mechanisms today are driving down the costs of solar technology.

Decarbonisation technologies, such as renewable energy, are drawing in philanthropists who wish to integrate climate solutions and energy efficiency into their development work. Solar’s integration into government programmes such as the ‘Mission Solar Charkha’ in Uttar Pradesh reflects different development priorities, as it aims to provide green jobs to rural women while expanding renewable energy capacity in the state. These far-reaching benefits of climate solutions for employment, gender and low-income concerns can push philanthropists to enter the climate space.

Climate philanthropists could also adopt technological risks, by supporting identified early-stage innovations that prioritise climate mitigation efforts. This could fulfil philanthropy’s catalytic role in climate technology, paving the way for traditional funders such as venture capitalists or the public sector to bring the technologies to scale.

As a domestic climate narrative continues to evolve, one concern might be how to finance mitigation and adaptation actions – without encouraging a development-as-usual narrative. For example, businesses across the world are choosing to offset their carbon emissions, without investing in deeper climate solutions that change their approaches to production or manufacturing.

This mirrors international climate negotiations about mitigation till date. COP27, however, will place adaptation and resilience at the heart of the climate discourse for the first time. While India might not benefit from any global adaptation funds in the near future, businesses and philanthropists in India must evolve to weave their investments around climate adaptation and resilience.

  • Climate-conscious grant-making must become the norm: Philanthropists in legacy sectors, such as agriculture, livelihoods, and gender, must align their grant-making with growing awareness of climate vulnerabilities; Pix: Shutterstock

To reduce the chances of investing in harmful climate interventions, or ignoring deeper responsibilities, philanthropists can adopt a ‘climate lens’ or a ‘climate bias’, given the overarching effects of climate change across legacy sectors like housing, transportation, water, etc. A few philanthropic foundations started by technological innovators, such as the Zerodha backed Rainmatter Foundation, have openly adopted a climate bias. Younger HNIs who have built businesses in the era of climate change and are just entering the climate space might also be more willing to adopt a climate bias – such as individuals who are a part of the Young India Philanthropic Pledge.

Why should Indian philanthropists take the lead on climate finance? 

With COP27 in sight and the Indian government putting pressure on developed countries to deliver on the promised international finance, why should Indian philanthropists take the lead on catalysing climate finance? Can’t we all just wait to see if COP27 and other ongoing international mechanisms deliver on their promises to address India’s finance deficit? Well, if the history of international climate negotiations has taught us anything, it is that these processes may be powerful but take decades to materialise. People-first climate action is urgent and cannot wait.

While we wait for increased public/private investment, and for the results of COP27 and subsequent conferences, climate philanthropy can play a crucial role in highlighting the urgency of climate action and identifying fundable climate solutions. This is why India must look to its own philanthropists, to catalyse climate finance towards a low-carbon future. And, yet, there are certain challenges to sustained philanthropic investment in equitable climate solutions.

Technology innovators and scientists have identified several green technologies that have great promise in sectors such as renewable energy, regenerative agriculture, etc, and while philanthropists may occasionally support them, there is a lack of structured efforts and targeted funding to bring them to scale. Climate philanthropy also tends to be directed at solutions across sectors, without a collaborative, long-term vision for climate-integrated development.

While encouraging HNIs to move into the climate space, we must encourage leadership that is able to communicate a strong, determined vision for people-first climate action. India’s climate leaders must be able to act on the urgency of people-first climate action, without dismissing the need for equitable development. We need leadership that can push for favourable policy ecosystems that catalyse climate innovation, when regulatory barriers impede progress, while also prioritising collaborative action.

Sustained philanthropic efforts might require climate action plans that span sectors, to prioritise funding strategic and catalytic climate interventions. Climate change affects everything – from how we live to how we invest. Although climate philanthropy might be viewed as a tiny drop in the ocean that is our finance deficit, with strategic interventions, it could just unlock larger pools of finance in India.

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