Filipino Climate Bonds, Here We Come

I’m in Manila, in the Philippines.

It’s been gusty and raining – there’s a typhoon crossing the northern part of the island. A modest reminder of last year’s devastating storm that destroyed the southern coast of Luzon.

I’m here for a meeting of an “International Expert Group on Using Climate Finance to Leverage Sustainable Transport.”

Ironic really, as it took an hour to get eight miles through traffic from the airport. But of course this is a not a rich country; the route to the ubiquitous glass skyscraper zone I’m in passes through acres of teetering favelas, piled up close to the edge of the airport.

The growth rate here is finally up – now a blistering 6.4% a year. There is a lot of investment in the Philippines; but they need big slugs of capital if they’re going to be able to choose the expensive route of clean energy and low carbon transport rather than low cost coal and gas power – and yet more clogged highways.

There’s a deal to be made

Rich countries should invest capital into fast-growth, green projects in developing countries, which deliver long-term financial and environmental returns.

The trouble is, fast-growth projects in emerging markets look risky – and they may be so, buffeted as they are by the winds of big economies’ trade.

That’s where development banks and wealthier nations can step in – covering the bits and pieces of risk that freak out rich countries’ pension and insurance fund investors.

This is a kind of pact that bridges capital rich economies with aging populations, and capital-needy, fast-growing economies full of younger people with a long working life ahead of them.

A global win win

In fact, if you look at a global distribution of age groups, it’s a perfect spread for a strong economy.

It’s just that our artificial national boundaries compartmentalize some of us into aging populations with not enough young people to support all the pensioners and others into very young populations with not enough older people to invest where needed.

So, the older demographics offer lower-cost (but still good earning!) capital to the younger demographics, allowing them to choose green.

Finance, of course, knows no borders. It just needs someone to package the products that allow us to invest money in the right places. Filipino Climate Bonds, here we come.