Hugh Wheelan: We must help the OECD bring investors and policy-makers together for ‘real’ climate finance

RI is supporting the Green Investment Financing Forum that starts in Paris tomorrow.

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I am the Master of Ceremonies for a major two-day conference, the Green Investment Financing Forum, starting tomorrow at the OECD in Paris.
I urge RI readers who won’t be at the event to tune in via the livestream.
The speakers justify the time. They include Yuriko Koike, Governor of Tokyo, Brune Poirson, Secretary of State to the Minister in France’s Ministry for Ecological and Social Transition, Yasuhisa Nakao, Deputy Vice Minister for International Affairs at the Japanese Ministry of Finance, Gabriela Ramos, Chief of Staff and Sherpa of the OECD to the G20, Al Gore, Former Vice President, United States of America (video address) and Sir Roger Gifford, Chairman, Green Finance Initiative, City of London Corporation.
But perhaps a more pressing reason to watch or listen is that the OECD is probably the pre-eminent convenor for government officials of some of the world’s largest economies to work with the finance sector to produce practical solutions to our most pressing ESG problems, particularly climate change. The current and encroaching dangers of the latter have been well articulated by the vast majority of the world’s pre-eminent climate scientists. The serious economic risks are also well known, as is the ‘tragedy of the horizons’ that stops finance supporting a transition because of short-term government realpolitik that will not interrupt the current economic status quo. But potential solutions to this grave blockage are thin on the ground. They necessarily involve the financial sector, which has the potential to radically change economic behaviour if policy signals are right.
Speaking at the Regional Roundtable on Sustainable Finance in Europe, held by the United Nations Environment Programme Finance Initiative (UNEPFI) last week in Geneva, Olivier Rousseau, Executive Director of the FRR, French Reserve Fund, said pension funds – the group often cited as potential capital providers to a green transition – could not bet against government inertia and poor pricing signals on the environment. He’s right.The solution is for governments and investors to come together and create the right market conditions for economic and environmental success. Both need to make vastly more effort here before it’s too late.
A notable recent boost to green finance has been the nascent green bond market, which was incubated at the OECD for early discussion and formulation. While it still needs to grow significantly, green bonds are a prime example of a positive feedback loop: as more bonds are issued, so issuers look for more debt opportunities advised by banks that are also looking to generate new buyers. In turn, exchanges look to list more green bonds and financial capitals seek to attract fund listings. All of this is now happening, aided by stellar ginger groups like the UNEP Inquiry and the Climate Bonds Initiative. The volition will iron out the bumps that inevitably come along the way. It shows this can work. The same kind of positive feedback loop needs to happen at a mammoth scale for green investment finance (infrastructure, energy efficiency, transport, etc) if the Paris COP21 agreement and the UN SDGs are to mean anything other than hot air. The capital required is truly mind-boggling unless we start to see genuine government/corporate/ developer/institutional investor agreements that produce viable capital and build structures that will work for all parties over the long-term using all the levers of policy: tax, risk sharing, market opportunity creation and well-constructed regulation.
There is a depressing amount of market talk at the moment on areas such as long-term infrastructure financing that does not have real climate solutions seriously embedded into its thinking; partly because of the economic tragedy of the horizons outlined above. Failure to do so now commits us to 50-odd years or more of climate destroying projects. The OECD’s mission is to promote policies that will improve the economic and social well-being of people around the world. It can help drive initiatives like the Taskforce on Climate Related Financial Disclosures and the EU’s High-Level Group on Sustainable Finance (HLEG) into other member countries and markets. Last year it created the Centre of Green Finance and Investment to help do this. Its work deserves our attention and support to build truly global capital feedback loops for change.