Geneva puts monetary value on eco-assets

Some feel Switzerland could become a pioneer in clean technology investments Keystone

One Geneva-based firm is investing in technology to improve mobile phone battery life. This is considered green finance, the kind of clean energy investments the world needs to keep climate change in check. 

This content was published on February 9, 2015 - 17:00
Paula Dupraz-Dobias,

Quadia is the name of the company that financially backs what it calls “significantly impactful” companies, including Cavendish Kinetics that want to extend the battery life of phones through more effective data processing.

While mobile users now see the inconvenience of having to charge phones too often, Quadia’s Guillaume Taylor told that in future, users will increasingly appreciate technological developments for their environmental value.

According to the United Nations climate change chief, Christiana Figueres, $1 trillion in clean energy investments like these will be needed annually to avoid global temperatures rising beyond a threshold of two degrees Celsius.

Geneva is well placed to play a leading role in this regard. At the December climate change summit in Lima, Peru, Swiss Environment Minister Doris Leuthard told that green finance could offer opportunities to companies in Geneva’s emerging sustainable finance sector. Quadia is a founding member of Sustainable Finance Geneva, an association of like-minded investment professionals that now counts 250 members.

“It’s all about economics,” explained Taylor, who is a former portfolio manager at a private bank. “Decoupling”, or maintaining economic output while reducing the environmental impact of economic activities, is central to Quadia’s strategy.

The value of air and water

“Is GDP growth really the base of everything?” Taylor asks. “Could we have no GDP growth and still see growth in other forms of capital?” He feels there is a need to put a monetary value on environmental assets, such as air, water and nature, upon which we all depend.

“Economic growth means nothing if you are destroying the environment, which would bring negative growth. We need to redefine what comes into economic growth, redefine what returns mean, what we are using as a benchmark and redefine the quantitative value of indicators.” 

While he said finance could be the “source” of many problems associated with growth, he felt “it could also be the antidote, the solution”. 

Taylor explained that for his company, funds have been increasingly sourced from corporate entities. 

An increasing number of larger established institutions in Geneva, but also Zurich, now have advisors or departments devoted to green finance. 

“It makes a lot of sense for the Swiss banking sector," Anton Hilber, head of climate change for the Swiss Agency for Development and Cooperation (SDC), explained. He said the government was “very pleased” at how the banking sector was “strategising and positioning itself” in sustainable finance, given the challenges confronting the sector. 

Geneva’s assets 

“Geneva has ‘assets’,” said Bertrand Gacon, president of Sustainable Finance Geneva.  The combination of international organisations, specialised NGOs and foundations as well as strong financial expertise, he said, had put Geneva in the race for the Green Climate Fund’s headquarters in 2012. Ultimately, Geneva before lost to Incheon, South Korea. 

One key international programme encouraging sustainable finance is the UN Environment Programme’s Finance Initiative, a public-private partnership between the UN and the financial sector, also based in Geneva. Last year in Davos, the organisation launched a 15-month inquiry into how to redefine the regulatory framework to better integrate climate change into finance. The UNEP Finance Initiative is supported by the SDC. 

Sustainable finance in Switzerland was valued at CHF57 billion ($61 billion) in a 2013 study, the most recent to date. (The next figures are expected in May). 

But tracking green private finance can be quite difficult. Hilber said that as no reporting obligations existed, and many companies valued confidentiality of data, the sums were difficult to calculate. 

For the SDC representative, it is important that the private sector receive signals so that more climate change measures can be introduced. He said that as countries had committed as early as in 2009 to invest $100 billion annually by 2020, including private support, one should expect that delegates at the COP21 in Paris later this year “would recommit to that in the deal”. 

Bottom-up or top-down? 

But Hilber thinks a legally binding international agreement is unlikely at the UN summit in December. “The heart of the deal is the nationally determined commitments, which have to be nationally established, with incentives and rules for the private sectors to promote new technologies.” 

The bottom-up approach, represented by national targets (known as intended nationally determined contributions or INDCs) is matched by a top-down international agreement on limiting the increase in average global temperature to two degrees Celsius. 

On sustainable finance, Hilber pointed to the tripling in the market of green bonds, where large financial institutions back loans to corporations investing in green technology. Last year, the European Investment Bank (EIB) issued its first green bond, placing $388 million to be managed by Swiss-based banks, including Credit Suisse. 

For Hilber, Switzerland’s market in sustainable finance is encouraging, but still rather new.

“With the Swiss banking sector in flux, they still have too many fires to put out left and right, but it makes us hopeful that they have this directional vision."

Background: UNFCCC

Geneva is hosting a conference of the United Nations Framework Convention on Climate Change (UNFCCC) from February 8-13, 2015. The UNFCCC, a UN secretariat based in Bonn, Germany, has 196 parties – including virtually all of the world’s nations – and is the parent treaty of the 1997 Kyoto Protocol for cutting industrial heat-trapping gases that warm the atmosphere like a greenhouse.

The Geneva conference is meant to be a negotiating session to prepare for the climate summit in Paris in December. The summit is meant to keep the planet from overheating by stabilising greenhouse gas concentrations at a level that will limit further human-induced climate change. The aim of the six-day conference in the Swiss city is to prepare a streamlined negotiating text for the summit. One highlight will be talks about something called “intended nationally determined contributions”, which are publicly announced commitments that are meant to put the planet on a path towards a low-carbon future. Under the UNFCCC, virtually all the world’s nations would commit to a new climate agreement in Paris based on these contributions.

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