Green funds a saving grace

This is a contribution from The ESL Blogs, produced by Environmental Solutions Ltd, a Kingston-based environmental management consultancy founded in April 1991.

Concern about climate change and its many far-reaching effects has propelled countries to come up with novel ways to achieve socio-economic development without causing additional damage to the environment.

One of the more recent solutions has been the establishment of various 'green funds' by countries and international aid and development agencies alike. According to Investopedia.com, a green fund is basically "a mutual fund or other investment vehicle that will only invest in companies that are deemed socially conscious in their business dealings or directly promote environmental responsibility. A green fund can come in the form of a focused investment vehicle for companies engaged in environmentally supportive businesses, such as alternative energy, green transport, water and waste management, and sustainable living."

Here in the Caribbean, Trinidad and Tobago leads the way with a well-established, well-financed green fund. The fund was first instituted under the Finance Act 2000 and is financed by a tax of 0.1 per cent of the gross sales or receipts of companies doing business in Trinidad and Tobago. The levy is payable quarterly. The purpose of the fund is "to provide financial assistance to community groups and organisations for activities related to reforestation, remediation, environmental education and public awareness of environmental issues and conservation of the environment". Since its inception, the fund has successfully financed a number of certified activities totalling approximately TT$117 million. The value of the fund as at January 2012 was TT$2.7 billion.

Key stakeholders

The key stakeholders in the fund are members of the private sector, which pay the Green Fund Levy; the Ministry of Finance, the official custodian of the fund's resources; the Ministry of Housing and the Environment, which provides certification green fund-supported activities; and civil-society organisations that use the resources. The fund can be accessed by corporate companies, non-profits, NGOs and community groups by making the necessary application.

Elsewhere in the region, only Puerto Rico has a similarly organised initiative, the Green Energy Fund, which was created out of the Puerto Rico Green Energy Incentives Act of 2010. The GEF's objective is to increase green energy production and promote sustainability. Through the GEF, the Puerto Rican government will co-invest up to US$290 million in the development of renewable energy projects on the island. The GEF can be accessed by residential, business and commercial property owners for the installation of solar or wind energy systems. According to a recent Associated Press article, the GEF will pay out approximately US$25 million in grants to businesses and residences during fiscal year 2014, which started on July 1. This marks a 25 per cent (US$5 million) increase over what was available last fiscal year.

While not having an overarching green fund like Trinidad and Tobago, Jamaica does have a green energy fund established in 2008 to provide loans for commercial and industrial entities, energy-service companies and manufacturers of energy-efficiency equipment and devices. The initial fund was established with more than J$500 million committed to the Development Bank of Jamaica (DBJ) by the PetroCaribe Fund. It was established to finance the development and implementation of energy efficiency, energy conservation and renewable energy projects.

A new J$68.6 million DBJ/Inter-American Development Bank (IDB) initiative, targeting small and medium-sized enterprises (SMEs), was set up in 2011 because of a sluggish response to the original fund by the targeted stakeholders. This is most likely caused by to the high interest rate (9.75 per cent) and short loan term - maximum four years.

Generally, countries in the Caribbean rely on various international development organisations to fund their green initiatives. One of the major funding partners has been the IDB, which approved US$30 million in green fund investment for Latin America and the Caribbean at the start of 2012. The Emerging Energy Latin America Fund II was designed "to boost the private sector as a driving force in clean technologies and renewable energy in the region". Last May, the IDB was selected by Canada as a key partner in its creation of the Canadian Climate Fund for the private sector in the Americas, to which Canada committed CDN$250 million (US$253.1 million).

IDB approvals

A year earlier, the IDB had also approved the Caribbean Hotel Renewable Energy and Energy Efficiency Action - Advanced Program (CHENACT-AP), a four-year, US$2-million grant to help the tourism sector in Barbados, Jamaica, The Bahamas, Suriname, Trinidad and Tobago, Belize, Haiti, Dominican Republic and Guyana become more energy efficient.

Another example of an internationally financed 'green fund' at work in Jamaica is the national Climate Change Adaptation Fund, which is a three-year project being implemented through grants totalling US$9.97 million from the Adaptation Fund. Launched last November, the national project's objective is to enhance the resilience of Jamaica's agriculture sector and coastal areas, in an effort to protect the livelihood and food security of its people.

Countries in the region are also looking to benefit from the Green Climate Fund, which was established at the 2010 United Nations Climate Change Conference in Cancun, Mexico. The aim of the fund is to help developing countries, such as those in the Caribbean, deal with and mitigate the effects of climate change "in the context of sustainable development".

Three years after its establishment, the GCF's plans to provide US$100 billion annually to developing countries up to 2020 have not yet materialised, as it has been hampered by design challenges and cash problems. The Caribbean Climate Blog identifies three main criteria that must be met in order for the region to benefit:

First, the board of the fund must complete, before year end, the design work necessary to ensure that the fund becomes operational by 2014.

Second, given the global scale of the climate challenge, the GCF must be well resourced. In this regard, developed countries should, by the end of this year, make firm commitments towards resourcing the initial capitalisation of the GCF.

Third, this fund must pay particular attention to the needs of those developing countries which are most vulnerable to climate change.

Email feedback to columns@gleanerj.com.

CAPTION - Dr Herbert Lowe seems quite impressed as Denise Herbol (right), mission
director, USAID/Jamaica, speaks on the importance of raising public
awareness about how everyday activities can contribute to climate
change. Looking on is Suzanne Ebert, also of USAID. Occasion was the
closing ceremony for the three-year climate change adaptation/risk
disaster management project in Cedar Valley, St Thomas, recently. -
Photo by Christopher Serju