ADVOCACY
FINANCING A JUST TRANSITION MEANS MOBILISING THE PRIVATE SECTOR The World Future Energy Summit is working with public and private actors to drive progress on climate action globally.
Leen Alsebai, general manager, RX Middle East, and head, World Future Energy Summit
P oliticians may determine cli- mate policy; regulators may set new industrial stand- ards; but it’s private capital that will ultimately prove decisive in financing a just transition to a sustainable global economy and environment. With the buy-in of the private sec- tor (both in terms of tacit support and literal investment of capital), it will be possible to mobilise enough resources to close the yawning cli- mate financing gap. Without it, any chance of meeting the ambitions set by individual nations and global institutions will melt away. A roadmap to mobilise capital towards sustainable development As the 29th Conference of the Par- ties to the United Nations Framework Convention on Climate Change takes place, all eyes will be on Baku, Azer- baijan. The world’s most influential leaders and thinkers will engage in an intense series of talks designed to keep
our collective response to climate change on track. As ever, COP29 has also encouraged a whole host of further climate-based events and initiatives on its side lines, looking to build on the momentum of the main effort. A question of scale – private cap- ital is essential to timely climate financing While the debate regarding the fea- sibility of the Paris Agreement 1.5°C target continues, climate action (and new climate goals) must be based on unfolding realities in our shared global environment and economy. Research shows that emerging markets and developing countries (excluding China) will need more than $1 trillion in climate finance per year by 2030, alongside a sevenfold increase in current renewable energy investments. Overall, the climate tran- sition is expected to cost $125 trillion by 2050. However, with various current international climate funding efforts being measured in single billions
or merely hundreds of millions, rather than trillions of dollars, it’s clear that the gap cannot be closed with such instruments alone. A key estimate from the research shows that even if every multilateral development bank dedicated every scrap of its available budget to climate financing, collectively they would only be able to cobble together around 4% of the total capital needed. On the other hand, there are $410 trillion of global financial assets held in private hands; committing just 1.4% of this total would be more than enough to close the climate financing gap by even the most conservative estimates. Mechanisms that can encourage sustainable investment Climate financing efforts have pro- duced mixed results in 2024 so far due in part to underinvestment by central banks. For example, the United States is the world’s largest economy but the Federal Reserve only ranks 17th on the latest Green Central Bank- ing Scorecard, which indicates its progress in the development of green central banking. This is a clear case of mixed messag- ing; private investors are being told repeatedly that the green revolution is coming, and that they must invest more fulsomely to support it, yet at the same time they see the biggest central banks and public financing institutions flag- ging in their own efforts. Insufficient clarity inevitably leads to a lowering of investor confidence. The reverse is also true; with a clearer indication of climate financing policy, regulations
Delegates attend the most recent World Future Energy Summit in April 2024
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Financing a Just Transition
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