Can you explain your role in Climate Financing, and your work in the area of climate change in today's ever changing world?
I joined the financial sector in 2007 after having worked in the energy/environment practice of a management consulting firm for the 15 years before that, interspersed with a two year stint in Paris at the United Nations Environment Programme. This was an unorthodox route into an investment bank but aligned with my view that to address climate change required fundamental shifts in the global capital markets.
My role at the bank has evolved over the past 12 years. Initially, I was hired to run the bank’s carbon markets business through which it provided hedging and other risk intermediation services for companies that needed to manage their exposure to a “price on carbon” because their greenhouse gas emissions were capped in emissions trading systems such as those now in place in the European Union, California, Quebec, South Korea and China. Over the past five years, however, my role has evolved to helping accelerate low-carbon business via advisory, capital markets services and balance-sheet lending to multi-national corporations, as well as support to institutional investor clients.
This has all happened while the Paris Agreement has been successfully negotiated in 2015, resulting in a much greater focus – from policy-makers, central bank regulators, investors, and others – on trying to ensure that all asset classes reflect climate risk considerations and that climate finance is scaled up to meet the huge financing requirements of the low-carbon economy. In sum, it’s a very exciting time and one that is seeing a huge array of financial innovation and new business opportunities that need investment in areas like energy, mobility and agriculture.
What is your view on how our environment relates to the Islamic ethic of sustainability? Can you give some examples of AKDN’s work in this area?
I admit to being heavily influenced by Dr Ismail Serageldin on this subject. I was working in Washington DC at a time when he served as Vice President for Sustainable Development at the World Bank. He was also a member of the Master Jury of the Aga Khan Award for Architecture. In his work for the Jury, he drew on Qur’anic verses to outline various core principles linking our faith to the natural environment:
- The role of humans is clearly set out as stewards of the earth,
- There is an order and balance on earth that must be maintained through environmental protection,
- Humans have a role to develop the earth’s natural resources and to make use of these gifts, so an anti-development approach isn’t the answer.
Across AKDN today, there are excellent examples of these core principles of sustainability – whether it’s the work of the Aga Khan Foundation helping rural communities integrate climate resilience in agricultural development in Afghanistan; the Aga Khan Agency for Habitat preparing communities in Central and South Asia from the effect of natural disasters such as extreme weather events linked to climate change; or the Aga Khan Fund for Economic Development helping finance renewable energy projects, such as the Bujagali hydropower plant in Uganda, to provide wider access to electricity.
The gardens at the Aga Khan Centre invite reflection about the interaction between man and nature. How do you see this relationship evolving?
The new Aga Khan Centre in London is truly an oasis in the city. Those of us living in urban environments need constant reminders about our interdependence with nature because it’s so easy to become disconnected from it. With its various gardens from diverse Islamic cultures and traditions around the world, the Centre is also an ongoing reminder of our interconnectedness across geographic boundaries. Addressing a global challenge such as climate change certainly needs a multiplicity of perspectives to develop appropriate solutions.
Do you agree that “little changes can make a big difference” in caring for the environment? If so, what changes would you recommend?
Absolutely. Successful action on climate is after all nothing but the sum of millions of little actions taken by everyone, everywhere, every day. There are dozens of changes that many of us can take that will contribute to making a difference and the beautiful thing is that most of these are economically-sound and health-smart actions too. Good examples include reducing food waste, saving energy, shifting to a green electricity provider, avoiding fast fashion, walking or taking public transport, shifting to a flexitarian diet, being conscious about ethical investments, participating in civil society, and increasing your education about environmental matters.
How should developed countries mobilise sufficient funding for mitigating and adapting to the adverse effects of climate change? Is the UN’s Green Climate Fund a sufficient model?
This is a question on which I first have to make a disclosure! In 2013 I was appointed as the first so-called private sector advisor to the Green Climate Fund (GCF) and served in that role from 2013 until the Paris Agreement in 2015. This was a voluntary role and meant I had to participate (without voting rights) in the GCF’s quarterly board meetings and represent the views of the private sector. From this experience, my view is that the GCF is just one part of the international climate finance ecosystem – it has the potential to help fund transformational projects in developing countries.
More generally, however, it’s an example of how the public sector has a broader role to play in engaging the mainstream capital markets to help de-risk investment opportunities in developing countries. Through this strategic use of public and sometimes philanthropic funding, we are starting to see much greater flows of capital into low-carbon investments from institutional investors that can bring scale such as pension funds, insurance companies, and sovereign wealth funds.
What should be the balance between public and private sector funding in reaching such targets, and to what extent should public funding be based on finance mechanisms versus grants?
This continues to be a sticking point--in part because countries have different views about what was actually included in the famous US$100 billion/year pledge made in Cancun! By some measures that level of funding has already been exceeded; by other measures it falls short. Personally, I think it is a red herring. The reality is that there is a huge financing need – much larger than $100 billion/year – to reach the climate objectives set out in the Paris Agreement. This financing need will only be reached when the private sector is fully engaged and mainstream markets are deployed to help deliver the technological solutions.
This does not minimise the importance of grant-type funding for least developed countries or for climate adaptation measures that can’t be otherwise addressed through capital markets. Public funding is a scarce resource though and needs to be used strategically where it can have the most impact. Both grant funding and commercially relevant investment financing are urgently required. Remember that addressing climate change is not about millions or billions; ultimately it’s about shifting trillions of dollars.
What advice would you give to anyone who wants to become more involved in environmental sustainability related careers or voluntary work?
Environmental awareness is no longer a ‘nice to have.’ It should be an essential part of any academic curriculum. There is definitely a need for environmental experts, but there is an even bigger need for people in all fields – health, education, engineering, business, finance – who are able to integrate environmental thinking into their chosen profession. I would suggest acquiring the skills to respond to a job advertisement that might say: “One Planet facing climate disruption in need of creative problem-solvers able to work seamlessly across disciplinary boundaries.”
Abyd Karmali OBE is a Managing Director and Climate Finance Executive at a global financial institution. He has worked for more than 25 years on climate change and sustainable finance and was made an Officer of the Most Excellent Order of the British Empire (OBE) for these efforts in the Queen’s New Year’s Honours List for 2019. Before joining the financial sector in 2007, he was a partner in a management consulting firm where he advised dozens of companies on their climate strategy and also with the United Nations Environment Programme in Paris where he served as Energy and Climate Change Programme Officer. His current advisory roles include the Judging Panel for the Queen’s Award for Enterprise, the Global Innovation Lab for Climate Finance, and co-chair of the Sustainable Finance Working Group for the International Chamber of Commerce. In the NGO sector, he serves on the Board of Directors for The Climate Group and on the National Committee for the Aga Khan Foundation (UK). He holds an MS in Technology and Policy from the Massachusetts Institute of Technology (MIT).