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BW Businessworld

Can We Save The Planet?

To bring carbon emissions under control is possible and is urgent. All the tools we need lie within our reach

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Are we winning the battle on climate change? The answer will have to be ‘no’, based on the various projections of carbon emissions, temperature increase and the associated impacts involved. Can we win? Of course, the answer is, ‘yes’. We can envisage a low carbon world based on sustainable growth and we have the knowledge and skills to achieve such a future.

It is often remarked that we don’t need reminding of the impacts of climate change. I think we do. The actions we have collectively taken to date to address climate change are not even close to enough. The climate scientists of the world are telling us that we continue tracking not along the middle trajectory or the lower trajectory, but towards the upper trajectory of climate change. We could be looking at 4° Celsius warming, or even more, according to the International Energy Agency a conservative body.

From theoretical physicist Schell Huber, director of the Potsdam Institute for Climate Impact Research and chair of the German government’s climate advisory committee, “the difference between two and four degrees is human civilisation”. A world that is four degrees warmer is a very difficult world. Warmer than that is not even a liveable world. How do we save our planet and turn towards a different future? The first point is deceptively simple. We must again and again imagine, envision and speak of the world we want. That overcoming the climate challenge is readily achievable and sustainable development is not a theoretical concept, but an evolving reality. The UN Sustainable Development Goals are but one of many examples of this evolution.

The next underlying question is how to bridge the climate finance gap? Till our response is incorporated into global economic and financial policy, investment directions, infrastructure design, agricultural practices and water use, we are losing the battle. How to convert 180 plus NDC commitments, into national climate plans and then into pipeline after pipeline of investable projects that meet international reduction emissions targets?

We must reconnect finance to the real economy. Green finance is part of that re-connection. The G-20 Green Finance Study Group has defined green finance as “the financing of investments that provide environmental benefits in the broader context of environmentally sustainable development”. Lord Stern, in his recently released Growth & Sustainability 10 Years on from the Stern Review presentation, said shifting to a green economy could drive global growth for the next three decades or more. That looks a reasonable foundation for a new century.

What does this mean in practice? When we talk about green finance, we are talking about financing low-carbon and climate resilient infrastructure investments. Part of that shift must be increased. Use of green bonds help developed and developing nations meet infrastructure, climate and broader sustainability challenges. Green bonds can deliver comparable risk-adjusted returns for infrastructure investments. They facilitate re-allocation of capital flows towards ‘green’ infrastructure, and they allow investors to attach purpose to their investments, reconnecting finance with hard assets in the economy.

Green infrastructure investments provide an opportunity for the financial sector to reposition itself as a generator of prosperity in the real economy.

We have the power to choose to rebuild our world with smart, climate resilient infrastructure that will enable continued investment returns, economic growth and prosperous societies. We must take it. A wide range of entities are issuing green bonds corporates, banks, development banks, municipalities – and we are also seeing asset-backed structures. There must be more.

In the words of Mark Carney, Governor of the Bank of England and chair of the Financial Stability Board, “To investors, green bonds offer a stable, rated and liquid investment with long duration. To issuers, they could tap the $100 trillion global institutional fixed income investor base. Moreover, the shift to the capital markets from banks will free up limited bank balance sheet capacity for early-stage project financing and other important infrastructure lending.”

All the actors in financial markets have a role to play. Global and national banks, as market facilitators, are in a position to educate clients on the green bond opportunities out there, to promote and generate deal flow.

Public sector regulators need to ensure that there are no obstacles to green bond market development, and propose fiscally efficient solutions to stimulate the market, especially in the initial phases.

Policymakers can support multinational development banks taking a greater role in project finance and risk bridging. They can green their national infrastructure development plans and projects.

Green finance has become mainstream, but what we have seen so far is only the beginning. We need trillions, not billions, in smart, clean, green, climate resilient infrastructure.

To save our planet, to bring carbon emissions under control is possible and is urgent. All the tools we need lie within our reach, we need to grasp them firmly with both hands.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.


Sean Kidney

The author is CEO, Climate Bonds Initiative

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