Minister of State Michael D’Arcy T.D. Address to Sustainable Nation Ireland Dinner, 18th September 2017

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Minister of State Michael D’Arcy T.D. Address to Sustainable Nation Ireland Dinner

Irish Embassy, London

18th September 2017

 

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Introduction

Good evening ladies and gentlemen.

First of all I’d like thank our new Ambassador in London for his welcome. Adrian brings a wealth of experience at the most senior level to a posting which is, arguably, the most challenging given the political convulsions surrounding us of late.

Before I touch on the detail of Green Finance I’d like to share a couple of related thoughts on the subjects of the green agenda and sustainability more generally.

On the former I recently travelled up to the Inishowen peninsula in Donegal following their recent flooding event.  It struck me that, as I met homeowners and businesses dealing with the fallout, that this is so to speak a coalface of green finance.  That this is the practice to the investment theory, and that what Green Finance embodies and must pursue is a responsible route alive to the changing realities of living on planet earth.

This type of finance must sustain our societies and economies as we grapple and adjust to these realities – both on our doorstep and at the far side of the world – of necessarily ambitious ‘green’ global climate goals.

On my second point, on sustainability, I return again to the domestic, and the fact that my colleague, the Minister for Finance, Paschal Donohoe, will in a couple of weeks deliver Ireland’s first balanced Budget in a decade.

This I believe goes to the heart the Green agenda in that it requires, and must be understood to contribute to, sustainable fiscal policy over the long-term.

This is what our Taoiseach means when he talks of his vision for an Irish Republic of Opportunity as a modern iteration of the Just Society.  From an accounting perspective this is about achieving the right balance between prudence and pragmatism as informing inclusive economic growth.

 

Now, to turn briefly with a word on the area of Green Finance.

Green finance is, at its simplest, about sourcing and spending the finance required to tackle climate change by developing climate action approaches that are sustainable and relevant.

Estimates of the financing requirement differ, but range up to the astronomical estimate of €90 trillion. Regardless of the actual amount, one thing is very clear – this is a major pressing issue and one which will be very expensive.

Inaction or a failure to tackle climate change will also be very costly, in terms of the cost to our environment. These costs are starkly magnified if this lack of action impacts upon future generations.

There is thus an urgent need to enhance the ability of the financial system to mobilise private capital for green investment. To be mobilised, information is needed.  Information on the quantum of investment and the potential uses of this investment but, most critically, the benefits to investors.

Mobilisation of private capital for green investment represents a huge opportunity for the Green Capital Markets to grow. Financial centres around the world are gearing-up to take advantage of this historic shift to a low-carbon economy and the commercial opportunities it presents.

 

Ireland was amongst the first countries to make attracting Green Finance a strategic priority, with Government and policy backing since 2012.

In March of 2015, the Irish government launched a Strategy for Ireland’s international financial services sector for the next 5 years – IFS 2020.

While acknowledging the spectacular growth in international financial services in Ireland, the strategy also recognises the need to respond to competitive challenges, innovate and develop new expertise to maintain and grow employment in the sector and continue to attract new foreign direct investment. 

From my perspective as Minister of State for Financial Services, I am aware of how vital Sustainable Nation will be in delivering on the Irish Government’s IFS 2020 Strategy on Green Finance.

In the context of developing job-creation opportunities from emerging IFS sub-sectors and new markets, Green Finance has been identified as a key strategic growth area for the years ahead. This area provides a unique opportunity for Ireland to display its deserved reputation as a centre of excellence for niche international financial services.

 

What is the Green Finance Opportunity?

The need to develop a sustainable financial system is rapidly evolving. Global policy drivers include the Paris Agreement G20, G7, OECD and most recently the EU High-Level Expert Group on Sustainable Finance.

Another critical player is the EU’s Climate-KIC. As the world’s largest climate tech platform, their work in decision metrics and finance as relates to this agenda is world-class. I am delighted that many of the Climate-KIC’s leadership team are here with us tonight.

International financial centres increasingly see Green Finance as their contribution and as a way of connecting with society to transition to a low-carbon economy.

As noted already, estimates of the financing requirement differ, but range up to €90 trillion. It is estimated that Ireland’s transition to a low carbon economy alone will require in excess of €40 billion of new capital investment by 2050.

It is worth noting that the transition is not just about Green Finance. Investment in low-carbon projects is driving the need for new products and services, thus creating marketplaces and stimulating the need for innovation and new skills. 

Ireland is well placed to deliver on this also – it has a cluster of over 350 companies delivering new products and services for the low-carbon marketplace. 

The 2017 Action Plan for IFS2020 published in January 2017 gives Sustainable Nation a key role in focusing on the promotion and positioning of Ireland as an International Hub for Green Finance.

Finance Green Ireland is the initiative of Sustainable Nation Ireland that sets out to deliver on this opportunity.

 

Why Ireland as a Global Green Finance Centre?

It’s down to our track record.  Ireland offers a unique blend of expertise and proven experience in Green Finance:

  • We are a global leader in international financial services.
  • We have a globally-recognised cluster of talent in renewable energy finance
  • World-leading professional services firms experienced in supporting green asset management are located in Ireland.

With much of this expertise here with us tonight, this combined expertise sets Ireland apart. And we are not starting from scratch, we already have €28bn of green finance activity.

Our leadership in IFS is well-known and it is not necessary to revisit it this evening given the knowledge gathered here.  However, there is a story of our renewable energy finance talent that needs to be told.

For decades, Irish companies have been globally active pioneers in developing, financing and delivering large-scale wind and solar projects, in both developed and emerging markets.

Projects managed from Ireland now span five continents. Our talent cluster in the renewable energy and low carbon sector can be traced to a small number of companies, including Airtricity.

Other Irish global pioneers include Mainstream Renewable Power, NTR, Gaelectric, Amarenco and BNRG. Without access to cash-rich balance sheets, these independent pioneers needed to develop innovative financing teams and solutions, resulting in exceptionally strong renewable energy finance skills.

While our renewable energy finance talent is world class, this is not all that we offer from a green finance perspective. We can also look to the scale of our activity in Green UCITS funds, listed Green Equities and listed Green and Climate-aligned Bonds.

 

Currently some of this capital is being deployed within Ireland on wind projects supported under the REFIT scheme, with funding being provided right across the capital stack. This is a real life example of green finance at work, supporting real projects, enhancing economic activity and enabling policy objectives.

Of course, the deployment of large volumes of investment capital requires clear policy direction and a stable regulatory environment. Whilst we are making steady progress towards our 2020 target of 16% of our energy from renewable sources, challenges remain.

My colleague the Minister for Communications, Climate Action & Environment recently launched the final consultation on the Renewable Energy Support Scheme.

This consultation builds on the 2015 Energy White Paper and the 2016 Programme for Government commitments, and will inform decision making as we continue to support renewable energy to 2020 and beyond to 2030 in order to decarbonise our energy sector.

I note with interest the results in the recent Contracts for Difference (CfD) auction here in the UK, which demonstrate the cost effective nature of the next generation of renewable projects when a clear investment signal is provided.

Whilst national policy must be tuned to our specific resources and needs, we should be aware of the learnings from other markets as we move towards broadening and diversifying our renewable technology mix.

I look forward to the finalisation of the consultation and implementation of the Renewable Energy Support Scheme so we can progress with an appropriate mix of renewable projects to achieve our policy goals in a cost effective manner.

 

Finance Green Ireland is Ireland’s response to the global call to mobilise investment to tackle climate change.

The aim is to drive awareness of Ireland’s world leading green finance credentials and promote Ireland as a leading Global Green Finance Centre.

In conclusion: while we are here this evening in these beautiful surroundings let’s not get distracted from our key purpose. That is – Think Green, think Green Finance, think Ireland.

Thank you.

 

ENDS

 

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