Liebreich: FiRe will light up the path to harnessing finance

In 1939, at the start of World War II, the countries that went on to defeat the Axis powers produced a total of 20,463 military aircraft of all sorts. By 1944, the final full year of the war, they were producing over 163,000. At the same time, performance improved dramatically: Britain’s iconic Spitfire boasted a 1,030-horsepower engine in 1939, whereas by 1945 its pilots could call on 1,860-horsepower.

Taking the two factors together, number of planes and engine power, the Allies achieved a 14-fold increase in total power output over five years – and they did so under the onslaught of hostile forces. It is a fascinating benchmark to bear in mind if world leaders ever decide to get really serious about tackling climate change.
Luckily (given the range of social and economic priorities in the world) a 14-fold increase in clean energy installations need be nothing more than a benchmark. Even in the most ambitious mitigation scenarios produced by the International Energy Agency or by our own GREMO model, an increase of around three in annual renewable energy installations over the next five years would see emissions on track to peak this side of 2030 and then decline.

The point is that we are far from red-lining the potential rate of change in our energy technology sector. But there is a second lesson to be learned from the rapid ramp-up in aircraft manufacturing during WW2: the critical role of finance. The monumental increase in production capacity was only made possible by the flows of equally monumental amounts of capital, via the US’s War Bonds, the UK’s National Savings, the Lend Lease programme and a range of other instruments. Financial innovation, it could be argued, was as important as engineering innovation in winning the war.

In clean energy, Bloomberg New Energy Finance figures show that world-wide investment increased from around $50 billion in 2004 to just over $300 billion in 2011; since then, however, it has been declining. It was down 11% in 2012, and investment in the first three quarters of 2013 declined a further 19% over the same period last year.
The rapid drop in costs for clean energy equipment mean that total installation volume will hardly have dropped this year. Nevertheless, all the analysis shows that the transition to a cleaner, safer, more resilient energy system would require worldwide investment in renewable energy, smart grid and so on, to increase by between two and three times within the next decade. When it comes to North-South flows of finance, the increase needs to be a factor of five or more, if developed countries are to meet their 2009 Copenhagen Commitment to invest $100 billion per annum in climate solutions in the developing world by 2020.

That brings me to Finance for Resilience – FiRe for short – the initiative that we launched during last week’s Global Green Growth Forum in Copenhagen. When I founded New Energy Finance (as it was then called), investment was a marginal issue in climate and energy policy circles. There was a deep rift between those who understood the world’s social and environmental challenges, those who understood the technologies which might provide solutions, and those who understood how finance flows around a modern, globalized, technologically advanced world, between savers, taxpayers, investment opportunities and spenders.

Things have changed, and finance has moved to the epicentre of the debate. I would like to think Bloomberg New Energy Finance has played an important role in closing that rift. We certainly know everyone uses our data! We have charted over 140 groups which are working on issues relating to finance for climate, clean energy, green growth or sustainability (which I shall collectively refer to as CCEGGS). They range from those dealing mainly in idea generation and knowledge sharing (think tanks, academic institutions), those focused on convening, coordinating or influencing others (NGOs, multilateral platforms, industry associations), all the way through groups representing those with their hands on the levers of action (ministries and regulators, corporations, asset owners and investors).

This emerging ecosystem has been prolific in diagnosing the barriers holding back finance; it has even been fairly vocal in proposing generic solutions that would increase the flow of investment. Where the system has yet to produce results is in catalysing action: driving through targeted interventions that allow tens and hundreds of billions of incremental dollars to flow to CCEGGS applications. This is not a critique: in the early years of any industrial system change there is a period of research, experimentation, Darwinian speciation and failure. But that period in clean energy is coming to an end. The future “dominant designs” are taking to the sky in increasing numbers, their competitiveness rising to meet the challenge of oil, coal and inefficiency. What is now needed is large-scale financial flows to get the world’s energy system and broader economy past the tipping point.


FiRe is an open-source platform, designed purely and simply to accelerate the flow of finance into climate, clean energy, green growth and sustainable solutions.
At FiRe’s heart lies a simple four-stage process: 1) turn all the great analysis and thinking done to date into concrete, actionable plans; 2) use the wisdom of the crowd to improve those plans and then prioritise them, identifying the small number that will have the biggest impact but also be achievable; 3) move the crowd seamlessly into implementation of the top ideas; 4) monitor, learn and repeat. The sort of ideas that FiRe could be used to accelerate include changes to energy or other sectoral policies, changes to financial regulations, financial innovations (whether originating in the private or development finance sectors), capacity building and education. FiRe will start with clean energy for the first year or two, but could easily be expanded to cover other sectors thereafter.

For ease of management we are planning to divide FiRe into around six streams: distributed energy in the developing world; developing world project finance; energy policy; financial regulation and disclosure; new investors and products; cities and municipalities. As a guide, we are looking for ideas which could, if implemented, drive at least an additional $1 billion of annual investment into clean energy by year three in each of these streams. Over the past few months my team and I have been working hard on the design of FiRe, making sure it complements all of the existing and planned initiatives out there. We are optimistic that the FiRe Priorities – the small number of high-impact ideas which emerge from the process each year – will be used as input into the UN Secretary General’s Climate Finance Initiative, the UN Framework Convention on Climate Change, Sustainable Energy for All, the Global Green Growth Initiative, the Clean Energy Ministerial, Agenda Positif (the broad economic initiative designed to support the COP21 negotiations in 2015), the OECD and numerous other multilateral platforms.We are designing specific ways for FiRe to support the design of the Green Climate Fund (GCF) and the work of the Climate Finance Innovation Lab (CFIL), a new initiative under discussion among major donor nations. Likewise FiRe will support the Clean Trillion being launched by CERES, initiatives being led by the World Bank and other members of the development and export finance community, and other major initiatives. We have been overwhelmed by the expressions of support we have received, from the policy community but also from organisations representing investors – the Banking Environment Initiative, the International Investor Group on Climate Change, UNEP’s Finance Initiative, the Investor Group on Climate Change and others.

FiRe’s role is not to compete with any of these platforms. Its role is to take whatever ideas they may be working on and help move them through to rapid implementation – assuming there is agreement by the broader clean energy community that the ideas are large-scale and implementable. There were 850 people at last year’s Bloomberg New Energy Finance Summit. In 2014 (April 7 to 9, New York City), we anticipate over 1,000 attendees. They will include key investors, policy-makers, energy companies and technology providers. This is the constituency that needs to act if investment flows into clean energy are to start climbing again, rather than drop.


FiRe is designed as an open-source process. So far it has been incubated by me and my team at Bloomberg New Energy Finance. Ultimately it may need to be spun out and run as a separate non-profit programme. But for the moment we are focused purely on getting it up and running. There are three main ways that you can help:

First, we are looking for Champions: one or more people with conviction to take a lead on each idea and power it through the process. If an idea is selected as a FiRe priority, the Champion may well become the de facto project manager, overseeing its implementation. If it does not, at least he or she will have met others working on the idea and refined it considerably.

Second, we are looking for Coaches: each Stream needs a small core team that makes sure the best ideas are being brought forward and knocked into shape. Our preparation work for FiRe has shown there are lots of good ideas out there, but very few have fully-developed action plans attached. Once the FiRe priorities are chosen, the Coaches will form a de facto working group to oversee implementation.

Third, of course, funding. So far Bloomberg New Energy Finance has been incubating the FiRe concept internally. We know we can deliver the process, because we have a great network and considerable knowledge in-house, and we know we can run the prioritisation exercise at our Summit as we have done similar things in the past. What we cannot fund internally is a research budget so that promising ideas can be properly analysed, a secretariat to convene working groups for each Stream, systematic support during the implementation of FiRe priorities or a communications unit. We are in discussions to secure funding for individual Streams, individual process stages, or the whole of FiRe. The more funding we secure, the more effective FiRe will be.

There is a third and final lesson from the experience of the war-time aviation industry. Any visitor to Cabinet War Rooms in London cannot help but be struck by the charts Churchill used to monitor progress, including war production, on a daily basis. For all the talk in climate circles about Monitoring, Reporting and Verification, 20 years after the UN Framework Convention on Climate Change and four years after the $100 billion Copenhagen Commitment, there is no agreement on methodology and no process in place to track investment flows (though to be fair, work is ongoing, led by the OECD, which Bloomberg New Energy Finance is supporting). By contrast, FiRe has a simple metric. The initiative is designed purely and simply to increase the flow of finance to CCEGGS solutions, starting with clean energy. The final part of the FiRe process is therefore to monitor the flow of funds catalysed by each FiRe initiative over time. Only by doing so will we all learn what works and develop the very large-scale flows of finance that are needed.

So FiRe is designed as much as anything as a truth-revealing mechanism for leading thinkers in clean energy. Do you believe enough in your idea to turn it into an action plan and persuade the FiRe community to act? And are you prepared to have your actions measured in dollars and cents? We very much hope you are up to the challenge!
There is more information on the FiRe website and my team and I are looking forward to working with each and every one of you. Let’s set the world on FiRe!

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