1. Francesca Romanin Jacur Milan University Francesca.romanin@unimi.it
The Involvement of Insurance Companies in Climate Finance: Tackling a Global Challenge by Investing in Local Solutions
Francesca Romanin Jacur
Milan University

2. Plan of the presentation
A Dynamic International Regulatory Framework
Climate finance
The Increasing Involvement of the Private Sector
Challenges and Opportunities for (Re-) Insurance Companies
Debate shifting from WHETHER climate change is happening to WHAT are the appropriate remedies.

3. Climate Change basic glossary
Mitigation: reducing GHG emissions
Adaptation: managing the effects of climate change, reducing vulnerability of human and natural systems
The target: the global scientific community (IPCC) calls for limiting global warming to 2o C above 1990 levels
Current pledges to reduce emissions meet ½ of the emissions needed
Towards a “low carbon economy”…

4. Climate Change Regime: the UN Framework Convention and the Kyoto Protocol
UNFCCC (1992) : Stabilization of greenhouse gases (GHG) concentration
KP (1997) : by 2012: global GHG reduction target of -5%.
Shortcomings deriving from limited active participation (no USA, no commitments by emerging economies – China, India, BRIC)
Post 2012: … ongoing negotiations!
COP meetings and the crisis of multilateralism, but what’s the alternative?
Climate change regime financial pledges: (nonbinding political agreement)
100 billion every year by 2020 (long term finance)
30 billion of fast start finance in

5. Climate Change Regime Architecture
SB for Implementation
UNFCCC
COP KP
COP/MOP
IPCC
SB for Technical Advice
Compliance Committee
World Bank
The Special Climate Change Fund (SCCF) was established under the Convention in 2001 to finance projects relating to adaptation; technology transfer and capacity building; energy, transport, industry, agriculture, forestry and waste management; and economic diversification. This fund complements other funding mechanisms for the implementation of the Convention.
The Least Developed Countries Fund (LDCF) was established under the Convention in 2001 to assist Least Developed Country Parties carry out the preparation and implementation of national adaptation programmes of action (NAPAs). In the course of preparing NAPAs, the LDCs identify priority activities that respond to their urgent and immediate needs with regard to adaptation to climate change.
The Adaptation Fund was established to finance concrete adaptation projects and programmes in developing country Parties to the Kyoto Protocol that are particularly vulnerable to the adverse effects of climate change.
The Adaptation Fund is financed from the share of proceeds on the clean development mechanism project activities and other sources of funding.  The share of proceeds amounts to 2% of certified emission reductions (CERs) issued for a CDM project activity.
The Adaptation Fund is supervised and managed by the Adaptation Fund Board (AFB).  The AFB is composed of 16 members and 16 alternates and meets at least twice a year ( Membership as of February 2010 (133 kB) ). 
Upon invitation from Parties, the Global Environment Facility (GEF) provides secretariat services to the AFB and the World Bank serves as trustee of the Adaptation Fund, both on an interim basis. These interim institutional arrangements will be reviewed in 2011.   
CDM
Secretariat JI
IET
GEF
2% of levy on proceeds
Adapt.
Fund
LDC
Fund
Grenn Climate
Fund
SCC Fund

6. Climate finance
Working Definition: The channeling of public resources (towards developing countries) (for mitigation & adaptation) through frameworks and mechanisms that leverage private sector capital, and are in line with national development goals.
Many sources: 50 international public funds, 6000 private equity funds, carbon markets, taxes, Clean Development Mechanism)
Challenges:
Catalyze new investment into climate mitigation and adaptation sectors
Develop new products with replication potential across markets and geographies
Challenges and proposed responses to enhance the effectiveness of climate finance 2010 is the record year for investments in clean energy (234 billion $, BUT only 10% outside G20)
The pricing of carbon: cap and trade, carbon taxes and CDM
CDM: But faces major challenges amid uncertainties on post-2012 framework
CDM to date ca. 3,500 registered projects in 71 countries
760 million CERs issued
3, 500 projects registered
1.2 billion CERs expected by end of 2012

7. Combining Developing Countries and the Private Sector Needs
Gaining the trust of Developing Countries
… and of the Private Sector
Need of coordination among financial institutions (national, bilateral, international)
Trust in institutions and their procedures (Consistency of funding resources, transparency and inclusiveness, legitimacy)
The impact of the financial crisis
The need to conciliate different interests:
Effective mitigation and adaptation action and environmental integrity
Economic development and poverty reduction in Developing Countries
Economic gain for the Private Sector
Bottom up approach/country ownership
Direct Access
Additionality and consistency of the funding sources by Developed Countries

8. Financing Adaptation GOALS: TOOLS: Generate new finance
Design and distribute goods and services that reduce vulnerability of individuals and communities to climate change
Provide risk management tools
TOOLS:
Drawing on capital markets to raise new finance for adaptation (climate bonds)
Direct credit lines to local finance institutions
Innovative means: microfinance

9. The role of insurance companies
Risk Reduction and Insurance
Catastrophe prevention, Risk assessment, emergency responses
Low rate of insurance penetration in developing countries
Technical assistance for setting up innovative financial products, programmes or services for the low carbon energy sectors
Companies constitute critical target groups for compliance since they partly control the behavior that has to be modified: states depend on the coopertion of non state actors to fulfil their international commitments

10. Climate Risk Management by the Insurance Sector
Public-private partnerships
With International Financial Institutions (World Bank)
At the country level
Index-based insurance solutions
Case studies
Challenges and opportunities of implementing climate insurance

11. Dr. Francesca Romanin Jacur
Thank you!
Dr. Francesca Romanin Jacur