Driving sustainable growth: Green finance
GREEN finance isn’t just an environment imperative; it’s also a smart economic decision,” said Christiana Figueres, former Executive Secretary of the United Nations Framework Convention on Climate Change (UNFCCC).
The urgent need for the acceleration of climate action cannot be overemphasised. This is because environmental challenges, such as increased temperatures, loss of biodiversity and water scarcity pose significant threats to the country’s sustainable development efforts. It, therefore, becomes imperative to fundamentally rethink our economic system in order to address these challenges as a nation.
Article 2, of the Paris Agreement, states that the treaty aims to strengthen the global response to the threat of climate change by ‘making finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development’. This entails moving away from traditional economic sectors that rely heavily on fossil fuels and contribute to greenhouse gas emissions and towards sustainable alternatives. Rethinking the economy also involves reorienting investment strategies to prioritise environmental sustainability and climate resilience. By mobilising financial resources towards environmentally sustainable and climate-resilient investments, green finance plays a crucial role in supporting the transition to a more sustainable and resilient future.
Green finance
Green finance can be defined as finance that supports environmentally sustainable economic growth, taking into account social and governance factors (OECD, 2019). It also encompasses a range of financial instruments, mechanisms and strategies that mobilize capital towards activities that have positive environmental outcomes. In as much as the terms ‘green economy’ and ‘green finance’ are often used interchangeably, they are actually different concepts.
Green economy refers to an economic system that is designed to achieve both economic growth and environmental sustainability. Green finance, on the other hand, refers to the financing of projects and initiatives that support the transition to a green economy.
It includes the use of public and private capital to invest in green technologies, businesses and infrastructure. Furthermore, the acceleration of green finance in Eswatini can turn out to have tremendous opportunities. Perhaps the most significant benefit is that it can help address the serious environmental challenges that we face, such as climate change.
Green finance can drive the development of cleaner and more efficient technologies, as well as supporting the adoption of sustainable practices. Furthermore, green finance has an ability to reduce the cost of capital for green investments. This is because green investments often have lower risks than traditional investments due to their positive environmental and social impact. In this way, green finance can help make green investments more affordable and accessible.
Progress
To date, the Government of Eswatini has taken some critical steps in ensuring the continuity of green finance within its borders. To begin with, the Eswatini Environment Authority (EEA) was established and is linked with green finance as it helps to create the conditions that make green investments possible. For example, the EEA has developed a set of environmental guidelines for sustainable mining, which are designed to promote responsible investment. The development of the Swaziland National Climate Change Policy (2016)
is another effort made by government to improve green finance, as it sets the overall framework for addressing climate change in Eswatini.
One of the main goals of the policy is to attract investment in low-carbon and climate-resilient projects. This is where green finance comes in, as it provides the necessary capital for such projects. Having mentioned the above, notable is that the road towards a green-financed Eswatini is still narrow as a lot can still be done by citizens in collaboration with our government. Firstly, we can raise awareness about the importance of green finance and the need to transition to a green economy.
This includes initiating awareness campaigns, even at grassroot level, with the aim of ensuring inclusivity in climate action. We can also promote sustainable practices more in our lives, such as using public transportation, reducing waste and investing in green technologies. Uniting towards such a common goal is an effective tool for enhancing green finance.
Challenges
Just like the green economy, green finance also has challenges impeding its acceleration in Eswatini. One major challenge is the lack of awareness about green finance and its opportunities. Many people are not aware about how to take advantage of the numerous benefits that green finance presents. This is a huge setback to the country’s efforts in improving sustainable development. As a solution, more awareness programmes about this subject matter have to be put in place in the country. In addition, the lack of capital available for green projects also hinders green finance.
This is because green projects often require a high initial investment, and the return on investment can be uncertain. To overcome this challenge, it is important to develop innovative financing mechanisms that can help bridge the funding gap for green projects. In retrospect, it has been proven that green finance is a crucial tool for tackling climate change and achieving sustainable development. By increasing awareness, building capacity and developing innovative financing mechanisms, we can ensure that green finance becomes a driving force for a sustainable future.