The high-level meetings of the United Nations General Assembly and Climate Week are “a bit like quicksand,” John Denton, the secretary-general of the International Chamber of Commerce, told me last week in New York.
“Unless you know what you’re doing, you could just sink into a sea of interesting discussions with interesting people, but you’re then trying to find a way to get out because there’s nothing deliverable. That’s the risk — unless you’re very focused.”
So what got done? World leaders adopted a Pact for the Future, which aims to revitalize multilateralism within a struggling institution, along with a Global Digital Compact and a Political Declaration on Antimicrobial Resistance — all of which my colleague Colum Lynch expertly recapped in this special newsletter.
In this edition, I’ll share some of my takeaways from UNGA on using insurance as a development finance tool, bringing more energy to Africa, new moves in impact investing, net-zero commitments, new financial instruments, and where things stand with investor commitments.
But first, for a bit of levity, one of my favorite moments of the week: While speeches around UNGA can often feel a bit monotonous, International Monetary Fund Managing Director Kristalina Georgieva kept things interesting, singing lyrics from “This Is How We Do It,” a Montell Jordan song, in the middle of a discussion about how the World Bank and IMF can work together to provide more funding.
Read: UN states call Russia’s bluff, adopt Pact for the Future
Also: Everything you missed at the 79th UN General Assembly
Premium economy
The explosion of humanitarian crises around the globe poses a challenge for international relief groups. What do you do when your operational budget falls short, forcing you to withhold support for the next emergency? You can insure it.
The International Federation of Red Cross and Red Crescent Societies purchased 15 million Swiss francs (nearly $18 million) of coverage from a group of reinsurers, including the Swiss insurance giant Aon, for their Disaster Response Emergency Fund.
The insurance arrangement — which carried an annual premium of 3 million francs (over $3.5 million) — pays out when the Red Cross’s demand for disaster relief surpasses a certain level in a year. That recently happened — marking the first time this insurance vehicle has been triggered — allowing the relief outfit to draw up to 15 million Swiss francs for disasters through the end of the year.
I moderated a roundtable that explored private finance for humanitarian response, and this was just one example of the creative ideas out there, including climate-related insurance policies. A group of insurance companies launched a new organization called Humanity Insured that looks to help support and explore new uses of insurance as a development tool.
Some of these concepts aren’t new, and insurance hasn’t always worked in the past. The key questions: Who will pay the premium for insurance policies? How many relief agencies are willing to pay the premium, like IFRC? Who pays for policies for smallholder farmers or small business owners? The answers seem key to unlocking greater use.
Background reading: How to make climate disasters pay (Pro)
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Anniversary accountability
We’ve seen a lot of corporate net-zero initiatives in the past several years, and probably just as many questions about what they’re actually achieving. That’s especially true as companies backtrack on sustainability commitments or shy away from environmental, social, and governance investments.
I caught up with members of the Net-Zero Asset Owner Alliance, a group of institutional investors committed to transitioning their investment portfolios to net zero greenhouse gas emissions by 2050, which just marked its fifth anniversary, to see how its efforts are going. The alliance’s 88 members manage some $9.5 trillion in assets. Investments in climate solutions among alliance members grew to 6% this year, or roughly $555 billion.
“We’ve got our ambitions clear. We've got the sort of rules of the road set there. But we've also done some really important work on fleshing out what does that good, supportive policy framework look like?” Matthew Holmes, group head of political and government affairs at the Zurich Insurance Company, told me.
These asset owners believe that climate change presents material financial risks and want to be able to manage their portfolios accordingly, they said. “This isn’t about us trying to be alarmist,” or being “climate activists,” Wendy Walford, head of climate risk at Legal & General, told me. It's about “raising the awareness of the systemic financial risk that is impacting the investment decisions.”
What do they need from policymakers to get there?
A new call to action advocates for long-term, consistent policy frameworks with ambitious targets and credible transition plans to attract investments for the climate transition as current uncertainty leads to volatility. It emphasizes reducing demand for oil and gas, phasing out inefficient fossil fuel subsidies and unabated coal-fired electricity, supporting workers and communities affected by the transition, and creating an equitable carbon pricing mechanism.
A new P+L
Every company has a financial statement that summarizes its revenues, costs, and expenses — its profit and loss statement. But what the measure of a company’s financial performance doesn’t take into account is the social or environmental impact.
There’s now an effort underway to change that. The idea of impact-weighted accounts isn’t new, but IFVI — or International Foundation for Valuing Impacts — is making progress when it comes to translating a company’s impacts into a price so that they can be more accurately tracked and used to make decisions.
IFVI released its first finalized methodology for greenhouse gas emissions, including a carbon price, after a lengthy research, vetting, and consultation process. And it's working on drafts of methodology and pricing for the impact of water consumption and occupational health and safety, among other factors, several of which are now in a public comment period.
“Most of the sustainability data that exists in the market right now is really difficult to contextualize,” Daniel Osusky, IFVI’s chief research officer, tells me. “It doesn't quite go the full step towards what can actually be decision-useful and understandable for the people who are actually making decisions.”
So impact accounting takes that difficult-to-understand data and, through scientific methods, converts it into a currency value so that companies and investors can more accurately take the full scope of their impact into account when people make business decisions. That currency value is a “game changer” because it allows comparability across impact topics, and financial performance and companies in a way that’s hard to do today.
So will we see companies issuing profit and loss statements that include not just pure financial numbers but values for their impact? It may sound a bit pie in the sky, but while widespread adoption may be a ways off, there is at least one company that’s proven it’s possible.
+ Curious about the future of ESG? Watch Devex's expert panel from UNGA 79 here.
Teamwork makes the dream work
While multilateral development bank reform will be in the spotlight in a few weeks at the World Bank annual meetings, the heads of MDBs met with top U.N. officials last week to discuss how they could better cooperate.
At the country level, both often assist governments with policy and planning, but their efforts are not always well-coordinated. I caught up with Ilan Goldfajn, the president of the Inter-American Development Bank, in New York to talk about the viewpoint note, an agreement from the group of MDBs that outlines how they can better work together, including scaling financing capacity and delivering more on climate.
On that note, the joint report on MDBs' climate finance — released recently — showed that they spent $125 billion on climate finance in 2023, up 25% from the previous year. It’s the most these institutions have ever spent on climate finance. Nearly $75 billion went to low- and middle-income countries, my colleague Jesse Chase-Lubitz reports.
Listen: MDBs want to cooperate more closely. What progress have they made?
Read: MDB climate finance hit a record in 2023: where is the money going? (Pro)
What we’re reading
How a quantum leap is needed to bring energy to 300 million Africans. [Devex]
Barbados Prime Minister Mia Mottley calls for a new World Bank emergency liquidity facility. [Reuters]
How the African Union’s African credit rating agency plan could work. [Semafor]
IFC investments hit a record $56 billion in FY2024, according to its Managing Director Makhtar Diop. [Reuters]
About the author
Adva Saldinger@AdvaSal
Adva Saldinger is a Senior Reporter at Devex where she covers development finance, as well as U.S. foreign aid policy. Adva explores the role the private sector and private capital play in development and authors the weekly Devex Invested newsletter bringing the latest news on the role of business and finance in addressing global challenges. A journalist with more than 10 years of experience, she has worked at several newspapers in the U.S. and lived in both Ghana and South Africa.
