Editing IPCC:AR6/WGIII/Chapter-14 (section)

=== 14.5.4 Transnational Business and Public-Private Partnerships and Initiatives ===

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Combined national climate commitments fall far short of the Paris Agreement’s long-term temperature goals. Similar political ambition gaps persist across various areas of sustainable development. Many therefore argue that actions by non-state actors, such as businesses and investors, cities and regions, and NGOs, are crucial. However, non-state climate and sustainability actions may not be self-reinforcing but may heavily depend on supporting mechanisms. Governance risk-reduction strategies can be combined to maximize non-state potential in sustainable and climate-resilient transformations ( [[#Chan--2019|Chan et al. 2019]] ).

An important feature of the evolving international climate policy landscape of recent years is the entrepreneurship of UN agencies such as UNEP and UNDP, as well as international organisations such as the World Bank, in initiating public-private partnerships (PPPs). [[#Andonova--2017|Andonova (2017)]] calls this ‘governance entrepreneurship’. Such partnerships can be defined as ‘voluntary agreements between public actors (international organisations, states, or sub-state public authorities) and non-state actors (non-governmental organisations (NGOs), companies, foundations, etc.) on a set of governance objectives and norms, rules, practices, and/or implementation procedures and their attainment across multiple jurisdictions and levels of governance’ ( [[#Andonova--2017|Andonova 2017]] ). Partnerships may carry out different main functions: first, ''policy development'' , establishing new agreements on norms, rules, or standards among a broader set of governmental and non-governmental actors; second, ''enabling implementation and delivery of services'' , by combining resources from governmental and non-governmental actors; and, third, ''knowledge production and dissemination'' , to for example, the evolution of relevant public policies.

An example of a prominent PPP in the area of climate mitigation is the Renewable Energy Network ( [[#REN21--2019|REN21 2019]] ), which is a global multi-stakeholder network focused on promoting renewable energy policies in support of the transition to renewable energy through knowledge, established in 2004. It includes members from industry, NGOs, intergovernmental organisations, and science and academia. Another example is the Green Economy Coalition founded in 2009 to bring to bear the perspectives of workers, business, poor people, the environment community, and academics in the transition to a greener and more sustainable economy. Another example is that in 2015, Peru, in collaboration with France and the UNFCCC Secretariat, launched the Non-state Actor Zone for Climate Action, an online platform to showcase commitments to climate action by companies, cities, regions and investors (Chan et al. 2016; [[#Bertoldi--2018|Bertoldi et al. 2018]] ). More recently, the UNFCCC Race to Zero initiative led by High-level Climate Champions Nigel Topping and Gonzalo Muñoz seeks to mobilise actors beyond national governments to join the Climate Ambition Alliance and pursue net zero CO 2 targets. Its membership includes 454 cities, 23 regions, 1391 businesses, 74 of the biggest investors, and 569 universities.

PPPs may also be developed to assist with implementation and support of states’ climate mitigation commitments. For instance, UNEP has initiated a number of PPPs for climate change finance. These are designed to increase financing for the purposes of disseminating low-carbon technologies to tackle climate change and promote clean energy in many parts of developing countries ( [[#UNEP--2018b|UNEP 2018b]] ; [[#Charlery--2019|Charlery and Traerup 2019]] ).

In the same vein, in 2010 FAO delivered the Framework for Assessing and Monitoring Forest Governance. The Framework draws on several approaches currently in use or under development in major forest governance-related processes and initiatives, including the World Bank’s Framework for Forest Governance Reform. The Framework builds on the understanding that governance is both the context and the product of the interaction of a range of actors and stakeholders with diverse interests ( [[#FAO--2010|FAO 2010]] ). For example, UNFCCC and the UN-REDD programme focus on REDD+ and UNEP focuses on The Economics of Ecosystems and Biodiversity (TEEB), institutional mechanisms that have been conceptualised as a ‘win-win-win’ for mitigating climate, protecting biodiversity and conserving indigenous culture by institutionalising payments on carbon sequestration and biodiversity conservation values of ecosystems services from global to local communities. These mechanisms include public-private partnership, and NGO participation. REDD+ and TEEB allocation policies will be interventions in a highly complex system, and will inevitably involve trade-offs; therefore, it is important to question the ‘win-win-win’ discourse ( [[#Zia--2018|Zia and Kauffman 2018]] ; [[#Goulder--2019|Goulder et al. 2019]] ). The initial investment and the longer periods of recovery of investment are sometimes barriers to private investment. In this sense, it is important to have government incentives and encourage public-private investment ( [[#Ivanova--2013|Ivanova and Lopez 2013]] ).

The World Bank has also established several partnerships since 2010, mainly in the field of carbon pricing. Prominent examples are the Networked Carbon Markets initiative (established 2013’ spanning both governmental actors and experts’ now entering a phase II) and the Carbon Pricing Leadership Coalition, established in 2015 and spanning a wide range of governmental and non-governmental actors, not least within business ( [[#World%20Bank--2018|World Bank 2018]] ; [[#World%20Bank--2019|World Bank 2019]] ; [[#Wettestad--2021|Wettestad et al. 2021]] ). These partnerships deal with knowledge production and dissemination and seek to enable implementation of carbon pricing policies. The leadership role of the international ‘heavyweight’ World Bank gives these partnerships additional comparative political weight, meaning also a potentially greater involvement of powerful finance ministries/ministers generally involved in Bank matters and meetings.

PPPs for cooperation on climate mitigation goals have emerged at multiple levels of governance beyond the realm of international organisations. For example, PPP funding for cities expanded rapidly in the 1990s and outpaced official external assistance almost tenfold. Most of the PPP infrastructure investment has been aimed at telecommunications, followed by energy. However, with the exception of the telecommunications sector, PPP investments have generally bypassed low-income countries ( [[#Ivanova--2017|Ivanova 2017]] ). It is therefore not surprising that PPPs have added relatively little to the financing of urban capital in developing countries over the past two decades ( [[#Bahl--2014|Bahl and Linn 2014]] ). [[#Liu--2010|Liu and Waibel (2010)]] argue that the inherent risk of urban investment is the main obstacle to increasing the flow of private capital. Nevertheless, there have been cases where PPP investments have exceeded official external aid flows even for water and sanitation, and highly visible projects have been funded with PPPs in selected metropolitan areas of developing countries, including urban rail projects in Bangkok, Kuala Lumpur, and Manila ( [[#Liu--2010|Liu and Waibel 2010]] ).

Local governments are also creating cross-sector social partnerships (CSSPs) at the sub-national level, entities created for addressing social, economic, and/or environmental issues with partner organisations from the public, private and civil society sectors ( [[#Crane--2014|Crane and Seitanidi 2014]] ). In particular, with support from international networks such as ICLEI Local Governments for Sustainability, C40, Global Covenant of Mayors, and Global 100% Renewable Energy, local governments around the world are committing to aggressive carbon reduction targets for their cities ( [[#Ivanova--2015|Ivanova et al. 2015]] ; [[#Clarke--2017|Clarke and Ordonez-Ponce 2017]] ; [[#Kona--2018|Kona et al. 2018]] ). Research on CSSPs implementing community sustainability plans shows that climate change is one of the four most common issues, after waste, energy and water (which are also highly relevant to climate mitigation) ( [[#MacDonald--2017|MacDonald et al. 2017]] ).

Community climate action plans consider all GHGs emitted within the local geographic boundaries, including from industry, home heating, burning fuel in vehicles, and so on. It is these community plans that require large multi-stakeholder partnerships to be successful. Partners in these partnerships generally include the local government departments, other government departments, utilities, large businesses, Chambers of Commerce, some small and medium-sized enterprises, universities, schools, and local civil society groups ( [[#Clarke--2016|Clarke and MacDonald 2016]] ). Research shows that the partnership’s structural features enable the achievement of plan outcomes, such as reducing GHG emissions, while also generating value for the partners ( [[#Austin--2012|Austin and Seitanidi 2012]] ; [[#Clarke--2016|Clarke and MacDonald 2016]] ; [[#Clarke--2017|Clarke and Ordonez-Ponce 2017]] ). [[#Stua--2017b|Stua (2017b)]] explores the Mitigation Alliances (MAs) on the national level. The internal governance model of MAs consists of overarching authorities mandated to harmonise the overall organisational structure. These authorities guarantee an effective, equitable and transparent functioning of the MA’s pillars (the demand, supply, and exchange of mitigation outcomes), in line with the principles and criteria of the Paris Agreement. This hybrid governance model relies upon its unique links with international climate institutions ( [[#Stua--2017a|Stua 2017a]] ).

Transnational business partnerships are a growing feature of the landscape of multi-level, multi-actor governance of climate change. Many business leaders embraced the ethos of ‘business cannot succeed in societies that fail’. Examples of this line of reasoning are: poverty limits consumer spending, political instability disrupts business activity, and climate change threatens the production and distribution of goods and services. Such situations endanger multinational enterprise investments, global asset management funds, and the core business of international insurance companies and pension funds ( [[#van%20Tulder--2021|van Tulder et al. 2021]] ).

A leading example is the World Business Council on Sustainable Development (WBCSD), a global, CEO-led organisation of over 200 leading businesses working together to accelerate the transition to a sustainable world. Member companies come from all business sectors and all major economies, representing a combined revenue of more than USD8.5 trillion and with 19 million employees. The WBCSD aims to enhance ‘the business case for sustainability through tools, services, models and experiences’. It includes a Global Network of almost 70 national business councils across the globe. The overall vision is to create a world where more than 9 billion people are all living well and within the boundaries of our planet, by 2050. Vision 2050, released in 2010, explored what a sustainable world would look like in 2050, how such a world could be realised, and the role that business can play in making that vision a reality. A few years later, Action2020 took that Vision and translated it into a roadmap of necessary business actions and solutions ( [[#WBCSD--2019|WBCSD 2019]] ). WBCSD focuses on those areas where business operates and can make an impact. They identify six transformation systems that are critical in this regard: Circular Economy, Climate and Energy, Cities and Mobility, Food and Nature, People and Redefining Value. All have an impact on climate. An important initiative launched in September 2008 –Natural Climate Solutions – has the objective of leveraging business investment to capture carbon out of the atmosphere. This initiative has built strong cross-sectoral partnerships and is intended to tap into this immense emissions reduction solution potential through natural methods with the help of private investment.

The Global Methane Initiative (GMI) is a multilateral partnership launched in 2004 by the United States Environmental Protection Agency along with 36 other countries to generate a voluntary, non-binding agenda for global collaboration to decrease anthropogenic methane releases. The GMI builds on the Methane to Markets (M2M) Partnership, an international partnership launched in 2004. In addition to the GMI’s own financial assistance, the initiative receives financial backing from the Global Methane Fund (GMF) for methane reduction projects. The GMF is a fund created by governments and private donors ( [[#Leonard--2014|Leonard 2014]] ).

Another potentially influential type of transnational business partnership is investor coalitions or alliances formed for the purpose of pushing investee companies to adopt stronger measures for stranded asset management and climate change mitigation. MacLeod &amp; Park (2011, p. 55) argue that these transnational groups ‘attempt to re-orient and “regulate” the behaviour of business by holding corporations accountable via mechanisms of information sharing, monitoring of environmental impacts, and disclosure of activities related to the corporate climate footprint’. This favours a theory of active ownership (investor engagement with corporate boards) over capital divestment as the optimal pathway to shape the behaviour of corporate actors on climate risk ( [[#Kruitwagen--2017|Kruitwagen et al. 2017]] ; [[#Krueger--2020|Krueger et al. 2020]] ).

Transnational cooperative action by investors on climate mitigation has been facilitated by international standard-setting on issues of climate risk and disclosure. For example, in 2017 the Financial Stability Board’s Taskforce on Climate-related Financial Disclosures (TCFD) adopted international recommendations for climate risk disclosure ( [[#TCFD--2017|TCFD 2017]] ). These recommendations, which apply to all financial-sector organisations, including banks, insurance companies, asset managers, and asset owners, have received strong support from investor coalitions globally, including Climate Action 100+ (with 300 investors with more than USD33 trillion in assets under management), the Global Investor Coalition on Climate Change (a coalition of regional investor groups across Asia, Australia, Europe and North America) and the Institutional Investors Group on Climate Change (IIGCC). One of the key recommendations of the TCFD calls for stress-testing of investment portfolios taking into consideration different climate-related scenarios, including a 2°C or lower scenario. Broad adoption of the TCFD recommendations could provide a basis for decisions by investors to shift assets away from climate-risk exposed assets such as fossil fuel extraction projects ( [[#Osofsky--2019|Osofsky et al. 2019]] ). There is strong evidence showing the urgent need for scaling-up climate finance to mitigate greenhouse gases in line with pursuit of limiting the temperature increase to 1.5°C above pre-industrial levels, and to support adaptation to safeguard the international community from the consequences of a changing climate. While public actors have a responsibility to deploy climate finance, it is clear that the contribution from the private sector needs to be significant ( [[#Gardiner--2016|Gardiner et al. 2016]] ).

As most of these partnerships are of recent vintage an assessment of their effectiveness is premature. Instead, partnerships can be assessed on the basis of the three main functions introduced earlier. Starting with policy development, that is, establishing new agreements on norms, rules, or standards among a broader set of governmental and non-governmental actors, this is not the most prominent aspect of partnerships so far, although both the cities’ networks and risk disclosure recommendations include some elements of this. The second element, enabling implementation and delivery of services, by combining resources from governmental and non-governmental actors, seems to be a more prominent part of the partnerships ( [[#Ivanova--2020|Ivanova et al. 2020]] ). Both UNEP financing, the WBCSD, the REDD+ and TEEB mechanisms, and PPP funding for cities are examples here. Finally, the third element, knowledge production and dissemination, for example, contributing to the evolution of relevant public policies, is the most prominent part of these partnerships, with the majority including such activities.

There is a relatively large volume of literature that assesses PPPs in general. Much of this applies to partnerships which, either by design or not, advance climate goals. This literature provides a good starting point for assessing these partnerships as they become operational. These can help assess whether such partnerships are worth the effort in terms of their performance and effectiveness ( [[#Liu--2017b|Liu et al. 2017b]] ), their economic and social value added ( [[#Quélin--2017|Quélin et al. 2017]] ), their efficiency ( [[#Estache--2014|Estache and Saussier 2014]] ) and the possible risks associated with them (Grimsey and Mervyn 2002).

What is less common, but gradually growing, is an important and more relevant literature on criteria to assess sustainability and impact on climate and development goals. [[#Michaelowa--2017|Michaelowa and Michaelowa (2017)]] assess 109 transnational partnerships and alliances based on four design criteria: existence of mitigation targets; incentives for mitigation; definition of a baseline; and existence of a monitoring, reporting, and verification procedure . About half of the initiatives do not meet any of these criteria, and not even 15% satisfy three or more. A recent study using a systematic review of business and public administration literature on PPPs concludes that research in the past rarely incorporated sustainability concepts. The authors propose a research agenda and a series of success factors that, if appropriately managed, can contribute to sustainable development, and in so doing contribute to a more solid scientific evaluation of PPPs ( [[#Pinz--2018|Pinz et al. 2018]] ). There is evidence that with the adoption of the Sustainable Development Goals, many of which are directly linked to climate goals, PPPs will become even more prominent as they will be called upon to provide resources, knowledge, expertise, and implementation support in a very ambitious agenda. PPPs in the developing world need to take into account different cultural and social decision-making processes, language differences, and unfamiliar bureaucracy ( [[#Gardiner--2016|Gardiner et al. 2016]] ). Having more evidence on what norms and standards in relation to sustainability are used and their governance is essential ( [[#Axel--2019|Axel 2019]] ). The issue of double counting should be revised. GHGs are accounted both at the national and sub-national level or company level ( [[#Schneider--2014|Schneider et al. 2014]] ). Some recent studies aim to provide systems to assess the impact of PPPs beyond the much-used notion of value for money. One of these recent studies proposes a conceptual model that addresses six dimensions relevant to economic, social and environmental progress. These include resilience and environment, access of services to the population, scalability and replicability, economic impact, inclusiveness, and finally, degree of engagement of stakeholders ( [[#Berrone--2019|Berrone et al. 2019]] ). These systems will most likely continue to evolve.

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