Oct 27, 2021
Climate finance is high on the agenda in Glasgow – how much do we need to raise and how will we do it?
The goals of COP26 are crystal; secure global net zero by mid-century, keep the 1.5-degree pathway in reach and in acknowledgement that climate change is devastating the world, and will do so even as emissions are reduced, we must protect communities and nature.
Meeting these goals involves multiple workstreams – phasing out coal, phasing in renewables, switching out the old infrastructures, switching to electric vehicles, ending deforestation, restoring ecosystems.
The bill for all this is huge. The developing world needs the investment now – fast. The developed world needs to transfer the funds.
Which is why the first order of business at COP26 will be the mobilization of climate finance.
How much do we need?
The answer is as crystal as the COP26 goals – trillions.
The Energy Transitions Commission (ETC) has a more precise estimation. They said $1-2 trillion is needed annually in their September 2020 report. An intimidating figure, but it’s not out of reach…
How do we get there?
It’s clear, public money can’t solve our climate challenge on its own. Everyone has a role to play. Governments, international finance institutions, multi-lateral funds, civil-society, and business…
There are trillions locked in private sector finance companies. These businesses need to do more. The Glasgow Alliance for Net-Zero aims to inspire them to do just that. Chaired by Mark Carney, the alliance has united 160 firms, from leading net-zero initiatives across the finance world, managing assets worth +$70trillion.
Carney, the UN Special Envoy on Climate Action and Finance, has described the goal of net zero as the greatest commercial opportunity of our time.
His wider explanation is on record:
Climate change is an existential threat. But the converse is, if you are making investments coming up with new technologies, changing the way you do business, all in service of eliminating that threat, you are creating value. Companies, and those who invest in them, and who are part of the solution, will be rewarded.
Carney’s comments are a clear play to the instincts of private finance.
Crowding in that private investment is where multi-lateral funds could make a difference. The Climate Investment Funds approach provides highly competitive financing that reduces risk for investors, lowering barriers to piloting new clean technologies, scaling up proven solutions, opening up sustainable markets, and mobilizing private sector capital for climate action. Rallying MDBs and businesses behind increasingly ambitious climate goals and complementary action, CIF draws in diverse partners who might otherwise be deterred from investing alone.
Meanwhile…
The developed countries must deliver on their promises, made at Copenhagen’s COP15 2009, to channel $100B annually to developing economies to aid their clean transition. Whether this has since been achieved is a moot point. The OECD estimated that $78.9bn of climate finance was mobilised in 2018. Lots of money, but short of the promise.
There’s no doubt it’s possible to reach the zero-carbon economy needed by 2050 – so said the ETC report alluded to earlier. However, action, right now is crucial. Otherwise, it will be too late. The first order of business at COP26 and afterwards is crystal; climate finance.
