At the 2021 Climate Solutions Summit there was no shortage of consensus that this current window of opportunity is our best chance to address climate change. COP 26 is on the near horizon, and the Biden-Harris Administration and China both recently sent signals they are very much on board to effect change. As investors, we must move immediately and ambitiously to move capital if we are to avert climate disaster.
In a discussion on embracing the Paris Accord, moderator Aimée Christensen started off explaining that it will take $150 Trillion in capital to get to Net Zero by 2050. The Paris Accord is designed to stabilize greenhouse gas emission concentrations on a timetable that will allow ecosystems to adapt. There is a roadmap to reduce emissions by 45% by 2030, and Net Zero by 2050, but that timeline must shift forward. Christensen advocates a greater sense of urgency, looking at 2040, or ideally at 2030.
We have a lot to do, extraordinarily quickly, if any of those three targets are to be reached. Recent reports indicate that climate related risks will be unmanageable unless action is taken systemically, and that pathways forward require several targets. We must increase wind and solar by 3.5 times, retire coal plants, and increase electric vehicle and heat pump sales to over 50% of market share. The Food & Agricultural sector is another crucial piece.
Susan Reid, finance advisor to the COP 26 team International Climate Politics Hub, Global Optimism and Finance Working International Climate Politics Hub, discussed the enormous amount of activity coming into COP in Glasgow this November. 27 countries have made the commitment to Net Zero by 2050. With the Biden Administration signing back on, the entire G7 and the vast majority of the G20 are poised to commit to Net Zero emissions by 2050. This policy momentum sends a powerful signal to the private sector. Reid spoke about three main areas of focus for the Paris Accord at present:
- Countries are focusing on their commitments. The EU set a 55% reduction target, and the UK set a 68% reduction target for 2030. We need to see lots of activity and dramatically elevated ambition from the rest of the world. The United States needs to play catch up after the past four years.
- Global equitable equations distilled to loss and damage were not addressed adequately last time around, though we can’t hang our hats entirely on resolving those issues this year. There are still issues related to resolving carbon markets that must be addressed.
- The global equitable equation with regards to finance flows from Global North to Global South is the third primary issue. Developed countries committed to $100 billion in adaptation and mitigation finance for developing countries as a corollary to the Paris Accord, and we are falling short on that. We’re looking to leadership from the Biden Administration amid challenging times with COVID straining public coffers.
On the private finance front, champions are focused on normalizing Net Zero across the financial sector, and on scaling finance for sector-specific transformation, emerging markets and resilience. Unfortunately, however, we have way too little participation in this area from the United States.
Re-entering Paris on the first day of the new administration was hugely important, and now the real work begins, according to Bracken Hendricks, a leading policy strategist at the Roosevelt Institute, and is helping to launch the Climate & Economic Transformation Initiative. A multi-trillion dollar investment stream needs to be unlocked. We’ve done increasingly well on the divestment side, but need to invest a lot more. “Moving capital into projects that decarbonize and address social justice is the real challenge of our time,” said Hendricks. If people of color and frontline communities aren’t at the table, they will either be ignored or victim to the changes, as history has shown us. “We need to utilize public policy and impact investment to humanize and democratize the transition to a clean energy economy, and energize and uplift all people.”
Rajiv Joshi, founder of Bridging Ventures, framed this as a unique opportunity we’ve never taken before as a civilization. We have a decade to halve extreme emissions, employ nature-based solutions, and demonstrate that a green recovery creates more and better jobs. In order to move at this pace, per Joshi, “We need to have a scenario beyond compete and consume, and move into cooperate and conserve.” Companies must collaborate and share information and R&D in ways they normally would not.
What does ecosystem-based adaptation and resilience-building look like? It may look like, say, fishermen being at the center of a solution by planting mangroves and restoring coral reefs. There are multiple opportunities before 2050 to have capital, bankable small and large projects. This has to be an global, industry-level transformation.
Reid added that there are many different avenues now for investors. For example, you could join one of the Net Zero alliances. Asset managers should be voting their proxies on our assets. You might prefer to pile on with America Is All In, or work with other private sector actors. Or you can shift asset allocations around and invest in renewables, infrastructure, and transportation electrification, or sustainable forests--these are all global opportunities to be a part of pioneering efforts to accelerate investments in the solutions we need.
Hendricks quoted Janet Yellen’s observation that “Climate risk is structural economic risk.” We need to move our economy to a less risky path and be long-term investors; we must move to decarbonized assets, and to community-level projects that touch people’s lives. “Urgency and opportunity are linked. This is a chance to be transformative. Instead of just doing no harm, we must build justice and opportunity.”
We are at a moment in which we need to be sensitive, indicated Joshi. We have not struck the right tone in terms of healing our ecosystems. We must decide how to operate and resource the society we want to build. “We need a clear vision that provides an integrated framework where multiple narratives can live. Trust has been decimated at multiple levels. So, now we need to foster radical collaboration.”
Please stay tuned in the coming months; Confluence is developing plans to bring a delegation to participate in COP 26 in November 2021. If it is deemed safe to travel to Glasgow by then, we will do so, and if not, we will participate virtually. As we have learned in prior COP meetings, there so much that members can contribute to and learn from these collaborative sessions.
- Edie Farewell, Senior Program Director, The Climate Solutions Collaborative (C2C), Confluence