Cyprus fast-tracks green economy transition
Across the West, the mantra voiced by policymakers is ‘build back better’. Covid has taken its toll on all our industries, services and markets, and efforts to stimulate recovery are now underway. Eco-friendly initiatives are seen as central to a revival of fortunes. And Cyprus is fast-tracking a transition to a green economy – not only to restore the country to financial health in the wake of the pandemic but also to embrace important new investment opportunities to diversify our economy.
A key milestone along the path towards a more sustainable future was achieved in December when, as part of our efforts on cleaner energy generation, the European Investment Bank (EIB) agreed to provide substantial backing for the construction of the €152 million gas-fired Vasilikos power plant on the south coast, which will contribute to the production of enough electricity to allow us to begin shutting down plants reliant on oil.
Also in 2020, we began work on a €289 million floating LNG storage and regasification unit in Vasilikos Bay, again significantly financed by the EIB, which is expected to reduce our carbon footprint by around 30 per cent. Of course, we are committed to renewables but the transition from fossil fuel will not be achieved overnight – the focus will be on their gradual replacement.
Sustainability is at the heart of our economic plans, with many of the UN’s Sustainable Development Goals for 2030 strongly informing strategy. There is much that we need to change. In addition to reducing our reliance on fossil fuels for power generation, we must improve the efficiency of waste and water management and get more environmentally-friendly vehicles on our roads.
EU ‘Green Deal’ key to progress
A significant catalyst for progress on these and other environmental and sustainability initiatives is the European Union’s Recovery and Resilience Facility. Under the project, Cyprus is bidding for €978 million in direct grants conditional on a number of reforms – some long overdue – and progress on our National Recovery Plan. The plan seeks to advance reforms in areas ranging from public health, the labour market to education; promote economic diversification; as well as enhance the investment and digital environments. And critically, reflecting our overarching ambition, it will accelerate the transition to a green economy, with an emphasis on energy efficiency, sustainable transport, cleaner energy and waste and water management.
We are confident of introducing the measures required to access EU recovery funds, in so doing strengthening an already attractive business environment. Cyprus was last year named the most improved country in the IMD World Competitiveness Centre Report, while Foreign Direct Investment (FDI) reached record levels on the eve of the pandemic.
Like many developed nations, we took a big FDI hit last year, but we anticipate renewed investor interest in the months to come, as we advance our green agenda. The EU’s recovery funds will support innovative new environmental policies, some of which are already being applied to established sectors, such as shipping and tourism, and help to shape an emerging new area, investment funds.
As a leading maritime nation, with the third-largest merchant fleet in Europe, we believe that we should play a strategic role in trying to reduce the shipping industry’s greenhouse gas emissions. Cyprus is keen to see ship-owners use cleaner fuels, energy-efficient technologies and even consider the electrification of their vessels. But they need to be incentivised. We aim to do this through a series of inducements.
From this year, Cyprus-flagged ships, of which there are over a thousand, will receive up to a 30 per cent discount on tonnage tax, predicated on measures they take to reduce their impact on the environment by, for instance, cutting overall fuel consumption and using lower carbon-emitting fuels.
Greening of tourism
Tourism has long helped to sustain the Cypriot economy yet we are acutely conscious of our responsibility to properly husband our natural resources. Therefore, we reward hotel compliance with environmental standards and require them to demonstrate sustainable business practices. We also encourage tourists to pay visits to out-of-the-way parts of the island to help bolster their economies. Self-drive village routes, countryside walking trails, agrotourism and schemes to support female entrepreneurs in rural tourism typify our approach.
Marshalling local and international actors, the NGO Cyprus Sustainable Tourism Initiative has been performing an important role in progressing such initiatives as well as environmental conservation policies to protect our beaches and coastal waters. The good work being done will hopefully lay the foundations for a stronger, more resilient tourism sector when visitors begin returning in numbers in the summer.
The diversification of Cyprus’s touristic offering away from its traditional ‘sun and sand’ holidays has also led to the launch of TourInvest, a one-stop shop for private equity and family offices to support the landing of high-value investments into projects that align with the government’s green strategy, with a mountain spa and a winery among current projects available to environmentally conscious investors.
Sustainable financing
Meanwhile, demand for, and interest in, a lesser-known feature of the Cypriot business landscape has gathered pace during the pandemic. Cyprus has been described as Europe’s new investment fund hotspot. According to the Cyprus Securities and Exchange Commission (CySEC), at the end of the second quarter of 2020, the value of total assets under management was 7.97 billion euros, a 5.3 per cent increase on the first quarter. Indeed, Cyprus is reported to show the largest annual increase in the value of assets under management in recent years.
We recognise that Covid has given impetus to ESG investing, as investors’ sustainability concerns grow, particularly among millennials. Yet ‘Green’ funds not only appeal to ethically-minded investors, they are seen as safe havens in these uncertain times. In keeping with our ambition to be a beacon of sustainable economic development in the region, Cyprus wants to be in the vanguard of this new investment trend, and is giving priority to ESG funds as well as developing sustainable finance standards for all of Cyprus’s banks and financial services organisations.
Regulation of this emerging sector will be key to maintaining investor confidence. Indeed, CySEC is committed to fostering both firms’ compliance with the new standards and their ESG responsibilities in general – taking action where it sees a risk of mislabeling, misrepresentation or miss-selling, in order to protect consumers. Moreover, with our growing expertise in this area, we are also able to contribute at global level to the debate on sustainable finance.
As we emerge from the shadow of the pandemic, we have a unique opportunity to rebuild our economies in a more sustainable way. Cyprus is determined to accelerate the process because we understand that the adoption of a green agenda is critical to advancing financial and development goals. Only last month, the government announced €90 million worth of support for businesses to facilitate the transition to the circular economy. Foreign investment directed at key sectors will expedite the process. But we are developing and implementing eco-friendly policies to lead the way – turning the climate and environmental challenges into opportunities.