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The $6.3 trillion dollar question for mobilising private capital in the fight against climate change

The $6.3 trillion dollar question for mobilising private capital in the fight against climate change

This year’s OECD Forum on Green Finance and Investment Co-operation focused on the vital need for financial collaboration, and how to engender it.

Angel Gurría, OECD Secretary-General

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At this year’s OECD Forum on Green Finance and Investment in Paris on November 13/14, where I was the Conference Animator, Angel Gurría, OECD Secretary-General, re-iterated the challenge in his opening keynote. The latest IPCC report, he said, warned on the need to keep warming below 1.5 degrees to avoid multiple dire consequences such as 10 million people exposed to dangerous sea level rises or the disappearance of the world’s coral reefs. In line with the conference theme, he pointed to the clear role of the financial sector to solve the problem: “The OECD estimates that around USD$6.3 trillion of investment in infrastructure is required annually until 2030 in order to meet global development needs. Making these investments “climate-compatible” is not significantly more expensive; our estimate is approximately 10%. However, it does require a systemic shift of investments away from carbon-intensive infrastructure to low-emissions, climate-resilient forms. To mobilise green finance and investment at sufficient scale and speed, we need to improve co-operation between public and private stakeholders, better align policies and take more ambitious action.”
As he noted to the 600 high-level participants from 69 countries, that’s what the OECD’s Centre for Green Finance and Investment does.
The $6.3 trillion dollar question though is how much large-scale, institutional private capital is backing the green transition? And conversely, how much are those same powerful investors invested in ways that are thwarting it?

Michael Liebreich, Chairman and Chief Executive, Liebreich Associates, gave the good and bad news. The positive story is that $350bn every year is being invested into renewables, energy efficiency, power storage, smart grids and the like, representing $1 of every $6 spent on energy. And institutional investors are key allocators. But, the negative headlines, he said, are that while CO2 emissions have been flat for a few years, the Paris Agreement requires their elimination by 2050 and reduction by 45% by 2030 for a 50% chance of 1.5 degrees warming. He noted: “Disrupting the brown is what is necessary! Adding a green to a brown economy is not enough. Are we choking off the brown pipeline enough for a green economy to succeed fast enough?”
Green markets, he said, could grow quickly in a 7-year business cycle; for example LED now represents 40% of light bulb purchases, and electric vehicle sales in Norway have gone to 50% in a similar time-frame. But, he noted that there are only 2 cycles left for zero carbon budget: “Investors need to be asking themselves what assets they will be owning when there is no carbon budget and policies are clearer, and what they can do to adjust today?”
Certainly, major policy is moving.
Olivier Guersent, Director-General at the Directorate-General for Financial Stability, Financial Services and Capital Markets Union (DG FISMA) at the European Commission, gave his own recap of the infrastructure stats: currently responsible for 40% of global GHGs, and with the EU plotting €180-200bn per annum of additional investment between now and 2030: “This is a huge need. We know the EU should be putting a quarter of its budget towards climate issues, and that there is a large need for private investment because public finance

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