The Climate Summit focuses on a controversial question: who pays?
GLASGOW – Some of the world’s largest financial institutions pledged on Wednesday to mobilize trillions of dollars to help shift the global economy towards cleaner energy as UN climate summit negotiators struggled on how to pay the huge costs of climate change.
At the global climate summit here, a coalition of banks, investors and insurers who collectively control $ 130 trillion in assets said it will pledge to reach zero net emissions for its investments in by 2050. It was essentially a commitment to make climate change a central goal. major financial decisions for decades to come.
“We now have the essential plumbing in place to bring climate change from the fringes to the forefront of finance so that every financial decision takes climate change into account,” said Mark Carney, the former head of the Bank of England who leads the coalition. , as well as billionaire and former New York City mayor Michael Bloomberg.
The pledge was met with skepticism by environmentalists, who noted that the details were vague and that many banks still invest hundreds of billions each year in fossil fuels.
“Either they stop funding the expansion of fossil fuels or their net zero commitments are green wash,” said Jason Opeña Disterhoft, senior climate and energy activist at the Rainforest Action Network, an environmental group.
Money has long been a big sticking point in the global fight against climate change, and tensions over the issue erupted again at the Glasgow summit convened by the United Nations.
Ten years ago, the richest countries in the world pledged $ 100 billion a year in climate assistance by 2020 to help the poorest countries switch to cleaner energy and protect themselves from dangers increasing heat waves, floods, droughts and forest fires as the planet warms.
So far, these promises have not been kept. According to one estimate, rich countries are still short of tens of billions of dollars a year. And critics have said that even that money has been mis-targeted. Much of the aid to date has been distributed in the form of loans, which developing countries often struggle to repay. And only a tiny fraction of the funding has gone to efforts to adapt to climate change.
At the summit, which runs until Nov. 12, developing countries and small nations that emit a tiny fraction of the world’s greenhouse gases pleaded with rich countries to do more.
“Our countries are the least responsible for the damage to the global environment, but we are paying the highest price,” said Gaston Browne, Prime Minister of Barbuda and Antigua, who has struggled to rebuild himself after a category 5 hurricane hit the country in 2017..
Mr Browne noted that even though the world’s richest countries have failed to deliver on their climate finance pledges, major economies have spent an estimated $ 3.3 trillion since 2015 to subsidize fuel production and consumption. fossils, according to a recent study.
“We can all agree that it’s regressive,” Mr. Browne said. “I am pleading that we do not waste this crucial opportunity.”
Last month, diplomats from Canada and Germany announced a plan for rich countries to meet their goal of $ 100 billion a year in climate aid by 2023.
But as the dangers of global warming continue to increase – especially as countries have yet to commit to reducing their emissions enough to keep global warming at a relatively safe level – these financial needs are also increasing.
“This $ 100 billion is insignificant in light of what is really needed,” said Saleemul Huq, director of the International Center for Climate Change and Development in Bangladesh. “But the credibility of rich countries is at stake. If they can’t even deliver on what they have promised, why should we believe anything else they have to say? “
Treasury Secretary Janet Yellen said the United States would support a funding mechanism that aims to allocate $ 500 million a year to move developing countries away from coal-based power to wind, the solar and other low and zero carbon energy sources.
But she noted that the real cost of climate change would likely run into the trillions of dollars.
“I agree we all need to do more, and the United States is stepping up,” Ms. Yellen said. But, she added, “the gap between what governments have and what the world needs is wide, and the private sector needs to play a bigger role.”
To that end, a group of philanthropic foundations and international development banks also announced a $ 10.5 billion fund to help emerging economies with growing energy needs switch from fossil fuels to renewable sources.
The group, known as the Global Energy Alliance, aims to attract more donors in the coming weeks. At present, it has withdrawn $ 1.5 billion from the Rockefeller Foundation, the Ikea Foundation and the Bezos Earth Fund, as well as $ 9 billion from development banks such as the African Development Bank and the Society. international financial. The alliance says it aims to raise $ 100 billion in public and private capital to expand access to clean sources of electricity to one billion people in developing countries.
The money is needed to launch clean energy technologies that would not otherwise attract private investment, said Raj Shah, chairman of the Rockefeller Foundation, which helped set up the alliance.
“Accelerating climate transitions in developing countries will not happen if an immediate 20% return on every investment is needed,” Shah said. The money will support initiatives such as developing mini-grids in parts of rural India, helping Indonesia shut down some of its oldest and most polluting coal-fired power plants and developing of a hydroelectric project in Sierra Leone.
But the biggest announcement of the day came from the coalition of investors controlling $ 130 trillion in financial assets who have pledged to use that capital to meet the goals of net zero emissions in their investments by 2050. The group, known as the United Nations Glasgow Financial Alliance for Net Zero, is made up of 450 banks, insurers and asset managers in 45 countries.
Although voluntary, the agreement shows the commitment of a wide range of financial institutions – banks, insurers, pension funds, asset managers, export credit agencies, exchanges, rating agencies, credit providers. ‘indices and audit firms – to use their money to push companies to reduce emissions.
Environmentalists and negotiators from developing countries said they remained concerned about the lack of money to help countries adapt to sea level rise and other increasingly extreme disasters. .
Projects such as building dikes, planting mangroves, improving drainage and other ways to prepare for climate change disasters are not always attractive to investors because they do not generate profits, said the experts. This means that the vast majority of climate finance is still directed towards investments in wind, solar and other means of mitigating emissions.
At the same time, Glasgow’s vulnerable countries are arguing for a separate funding mechanism to help deal with disasters to which they cannot adapt, often referred to as ‘loss and damage’. But the proposal faces opposition from the richest countries, who fear it could open the door to future compensation claims.
Amid all the fighting, however, some observers have said the growing momentum around climate finance is a step up from negotiations a decade ago.
“There is the criticism that some things are a little fancy and some things a little green and vague, and yes,” said Rachel Kyte, dean of the Fletcher School at Tufts University and climate adviser to the secretary general. United Nations. “But six years ago, did anyone think we would have $ 130 trillion in some kind of club going in the same direction?” No.”
“We’re not there yet,” she added, noting that the world still does not provide enough funding to meet the vast challenges of climate change. “But things are starting to move in the right direction. “
The report was provided by Somini sengupta, Liz Alderman and Jenny gross