Climate change, sustainable finance — Towards a green Zim economy

Accelerating an orderly transition to sustainable finance is central in mitigating the impacts of climate change to achieve a green economy in Zimbabwe.

A green economy is a low carbon society.

Climate change, no doubt, poses a great threat to our country which threatens to alter the natural environment, disrupt our economy, and destroy social development.

Embracing sustainable finance provides a solution to the current climate change crisis.

Sustainable finance is the process of considering environmental, social and governance (ESG) pillars when making investment decisions with a purpose to save the planet and people.

The United Nations Environmental Programme (2016) views sustainable finance from four pillars: environmental, economic, social and governance.

In fact, sustainable finance is used to support the growth of low carbon sectors and divest from high carbon intensive sectors.

There are many types of sustainable finance which are carbon finance, climate finance, green or environmental finance, social finance, governance finance and development finance.

Although Zimbabwe is a small net emitter to the global economy contributing 0.07 percent in comparison to 78 percent greenhouse gas emissions (GHG) from the G20, it is ranked amongst the top 50 highly vulnerable countries to climate change.

It is also ranked amongst the top three highly vulnerable countries to climate change in Southern Africa. Vulnerability to climate change is high for Zimbabwe because of its heavy reliance on rainfed agriculture which exposes it to consequences of fluctuating weather patterns.

Evidence from analysis of greenhouse gases emissions by four sectors indicate that Zimbabwe is a high carbon intensive society which further increases the country’s vulnerability to climate change.

First, Agriculture, Forestry and Other Land Use (AFOLU) is the major contributor to greenhouse gas emissions.

Drivers of emissions in this sector are deforestation, veld fires, fuelwood gathering, commercial logging, harvesting construction timber, illegal settlements, tobacco curing and charcoal making.

Second, energy, including transport provides the second largest amounts of GHG emissions. Drivers of emissions in this sector are thermal power generation, residential use, road transportation, and agriculture.

Third, Industrial Processes and Products Use (IPPU) is the third largest contributor of GHG emissions.

IPPU refers to emissions from manufacturing processes which transform physical and chemical materials into products. Emissions in this sector come from ferrochrome, cement, chemicals, lime, lead, iron, and steel production.

Fourth, waste management contributes least to GHG emissions from solid waste management.

Urban authorities are experiencing challenges in managing solid waste due to population growth, urbanisation, industrialisation, and increased use on nonbiodegradable plastics and bottles.

Due to the negative impact of climate change in Zimbabwe, the growth of the sustainable finance market is overdue.

Zimbabwe is obliged to operationalise sustainable finance to achieve Paris Agreement, and 2030 UN Sustainable Development Agenda targets.

The Paris Agreement is a specific climate mitigation and adaptation framework that aims to limit global temperature increase to well-below 2°C and towards 1.5°C above pre-industrial levels by 2050.

Under this framework, each country is supposed to provide five-year carbon emission reduction targets called Nationally Determined Contributions (NDCs).

Zimbabwe’s current NDC target is 40 percent per capita carbon emissions reduction across all sectors of the economy by 2030.

The UN 2030 Agenda for Sustainable Development is a broad international framework that uses 17 sustainable development goals (SDGs) on planet, people, and partnerships to guide sustainable development.

To resolve the climate change crisis and deliver the targets of 2030 UN Agenda for Sustainable Development and 2050 Paris Agreement, efforts to mitigate, and adapt to climate change need to be taken seriously by the whole society.

So far, the government has made positive progress in terms of formulating the National Climate Policies, Low Emissions Development Strategy, Gender Policy, National Youth Policy, and various other policies providing ways to mitigate and adapt to climate change in Zimbabwe.

It is only fair to say that the way ahead will not be easy, but the need for speed action on finding solutions to climate change is unquestionable.

Shifting from a high to low carbon society demands radical changes to major sectors namely agriculture, forestry, other land use, energy, transport, mining, manufacturing, financial sector and waste management.

There is no-one size fit formula to accelerate the orderly transition to sustainable finance.

However, it is imperative that businesses, government, humanitarian groups and every member in the society collaborate and seriously embrace transformations in seven strategic areas I highlight below to avoid being caught in a climate investment related trap in the future.

A climate investment related trap occurs when climate related funds are chronically insufficient for the attainment of net zero.

  1. Greening the public finance budget

Greening the fiscal policy orderly can be achieved by diversifying government revenue streams away from carbon intensive sectors.

This can be done by increasing fiscal support to low carbon intensive activities such as the use of biogas, solar energy, public transport by 2030, hybrid vehicles, biodiesel fuel and green methods of agriculture.

In addition, limiting fiscal support to environmentally unfriendly carbon intensive activities such as thermal power generation and use of gas accelerates transition to sustainable finance.

Support to social and development finance is also key — education, health, and multilateral banks such as IDBZ.   Equally important is aligning fiscal policy and mandates of all state institutions and parastatals with our climate objectives.

  1. Greening central bank and financial sector

Embracing sustainable finance implies taking the impact of climate change to be part of the mandate for our central bank.

In simple, monetary policy must be greened to encourage businesses and financial sector to divest funding from carbon intensive industries and technologies.

The transition to sustainable finance will not happen without greening the financial sector first. Financial institutions can create innovative green financing models targeted at accelerating climate change mitigation, adaptation, and transition. For example, they can provide green loans that support the purchase of hybrid cars and green technologies.

  1. Creation of climate change, sustainability roles and forums

The transition to a low carbon society demands the creation of new job opportunities by businesses and government. These new roles will manage, design and steer green research on technology, reporting, partnerships, policy, people, and planet issues.

Examples of such roles include Head of Sustainability, Chief Sustainability Officer, Head of Climate Change, Head of ESG, Head of Climate Change Policy, Manager Sustainability, Head of Environmental Finance, and so on.

Furthermore, as a country we need to formulate forums, committees and taskforces that look at greening the economy and steering the society towards net zero.

These committees will ensure climate change campaigns are taken to the grassroots of our society.

  1. Promotion of digital finance

Digital finance is the integration of big data, artificial intelligence, mobile platforms, blockchain and internet of things in the provision of financial services.

Digital finance instruments such as pay as you go systems create new opportunities for financing infrastructure and influencing behaviours towards a low carbon society.

  1. Embracing sustainability accounting and reporting

Pursuing a low carbon society brings new standards of sustainability accounting and reporting. Financial statements will thus reflect shift from brown assets or liabilities to green assets or liabilities, funds in support of the transition to low carbon society, people, and planet.

Financial reporting will reflect the six capitals which are financial, manufactured, intellectual, human, social and relationship and natural.

  1. Inculcating a culture of green innovations and disruptive technologies

To address climate change, it is fundamental to promote a culture of green innovations, embracing disruptive technologies and supporting green research and development.

Many opportunities for green innovations exist in our economy in renewable energy such as solar and wind energy, biodiesel biogas, and introduction of more efficient crop varieties.

However, they still need further research.

Carefully embracing new and disruptive technologies such as permeable materials for pavements and roads, drought-resilient crops, improved irrigation schemes, mobile platforms, digital currencies, and digitisation could also help populations adapt to climate change impacts.

A culture of innovation can be boosted by supporting green research and development. Government, universities, and businesses can team up to scale up green research and development in areas such as smart energy, smart mining, smart agriculture, smart waste management, smart financial sector, and smart building.

  1. Enforcing stringent penalties to perpetrators of veld fires, deforestation, and illegal waste dumping.

Every year, there are huge losses on biodiversity due to veld fires and deforestation in rural areas.

Penalties and carefully thought anti-deforestation legislation should be intensified to those communities and individuals that cause veld fires and deforestation.

Accountability for veld fires and deforestation should reside in chiefs and headmen. In addition, measures and legislation for illegal waste dumping should be enforced to bring to a halt these habits.

Is the transition to sustainable finance achievable?

Yes, but let us just Go Green in everything we do! Green the economy, green the central bank, green the agriculture, green the urban councils, green the businesses, green the rural community, green the financial sector, and green the technology!

Just Go Green to deal with climate change!

l Dr. Gilbert Tepetepe is a Zimbabwean with a PhD in Finance from United Kingdom. He writes in his own capacity and the opinions expressed in this article reflect his own views. He can be contacted on tepetepegilbert@gmail.com.

The Herald

Positive Eye

Leave a Reply

Your email address will not be published. Required fields are marked *

Business

RBZ digital gold coins reach 737kg

THE Reserve Bank of Zimbabwe (RBZ) has issued 736,52 kilogrammes worth of gold-backed digital tokens since their introduction towards the end of last year. The tokens, which are called Zimbabwe Gold or ZiG became an approved means of payment for domestic transactions with effect from October last year. Introduced following the Monetary Policy Committee’s resolution […]

Read More
Zimbabwe National Road Administration chief executive officer Nkosinathi Ncube (right), flanked by board chairperson Dr George Manyaya and deputy board chairperson Ms Lizwe Bunu, speaks to the media during a Press conference in Harare yesterday.
Business

Zinara to roll out e-tolling this year

THE Zimbabwe National Road Administration (Zinara) will begin rolling out e-tolling before the end of the year to improve efficiency, motorists’ convenience and reduce operational costs. E-tolling is a cashless system that allows road users to make payments for road use with card facilities or e-tags at toll gates, with payments being made without vehicles […]

Read More
Business

Global commodity price slump chokes Zimplats

PLATINUM group metals (PGMs) producer Zimplats has been affected by the global softening of metal prices, which saw the firm incur a 32 percent revenue drop in the six months ended December 31, 2023. Due to the negative developments in the global economy, prices for most mineral commodities including platinum, nickel and lithium have been […]

Read More