Article
Nick Nuttall
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It Is Time to Move the Money
Remarks by Nick Nuttall, the UN Spokesperson for the Paris Climate Agreement and We Don’t Have Time Presenter at an Event Hosted at the Nordic Pension Fund SPP
Stockholm, 22 April 2024--The next UN climate conference in Baku, COP29, is being billed as the finance COP.
Nick Nuttall and Ingmar Rentzhog, CEO of We Don't Have Time at this year’s Earth Day event, themed ”Move the Money”
So how fast and how big are the financial flows right now in terms of financing a transition to a low carbon economy that meets the goals of the landmark Paris Climate Agreement of 2015?
Press Conference at the Landmark Paris Climate Agreement of 2015 where Finance was Also a Hot Topic--Nick Nuttall with UNFCCC executive secretary Christiana Figueres and Laurent Fabius, Chair of COP21
Let us remind ourselves, that we need to halve global emissions by 2030, to have a 50/50 chance of hitting net zero midcentury and keeping an average global temperature rise no higher than 1.5C.
Without finance shifting, we won’t make it.
It is a massive topic, and there a lot of numbers out there. But the world is getting better at unravelling this substantial jigsaw puzzle in terms of climate finance flows within countries and between them.
One good source, that does a good job at simplifying the numbers of government and perhaps more importantly private sector flows, is the Global Landscape of Finance by the Climate Policy Initiative (CPI)
It estimates that climate finance reached almost $1.3 trillion in the period 2021/2022, the last date we have.
At the time of the Paris Agreement of 2015, it stood at around $ 570 billion, so you could note that it has more than doubled since nations all agreed to act together.
Yet, and perhaps this is important, it is only currently around 1 per cent of global GDP.
It also masks the fact that most of this money is being spent on two key sectors---both renewable energy and energy efficiency, and the electrification of transport.
This current figure is also heavily skewed towards investments in richer countries in Europe and North America plus a relatively small number of big emerging economies like China, Brazil and some parts of Africa.
Investment in other key sectors is much lower—think transitioning to smart, regenerative agriculture, forestry, other infrastructure, waste management, natural or nature-based systems and adapting to climate impacts.
That is the best guess on the current state of play. Perhaps more importantly perhaps is what is actually needed to spare the world and its people from dangerous climate change over the coming years?
What finance flows are needed to keep at or below the key safety target of 1.5C target?
The USD 1.8 trillion that is currently invested in clean energy needs to climb to around USD 4.5 trillion a year by the early 2030, according to the IEA
The International Energy Agency estimates $4.5 trillion a year by 2030 for clean energy investments alone—a big slice of that is needed in developing or poorer countries.
Remember, climate change will not be solved by simply rich countries doing the right thing domestically, we need to help the poorer countries do their bit—a finance issue again.
Of course, clean energy is just part of the finance landscape, albeit a big part.
To cover all sectors beyond just energy, will require climate finance flows increasing from the current £1.3 trillion a year to $8 to 9 trillion up to 2030, according to the Climate Policy Initiative authors.
And then the flows need to jump perhaps as high as over $12 trillion a year from 2031 to 2050—the 2050 date being when the world needs to be what they call net zero.
Think of net zero as the point when we have restored the balance, where the emissions we produce into the atmosphere are down so low, a restored natural world of forests and other nature-based systems can absorb the pollution as it did in the past.
The sums involved sound big. But remember investments in energy, transport and infrastructure and agriculture and so on will be happening anyway.
It is a question of an additional, extra cost, to make those investments work for climate action, to help decarbonize our global economy.
How much is this extra cost then, above and beyond what you might call business and usual investment flows?
The consultancy McKinsey, writing for the World Economic Forum, estimates that $3.5 trillion of the bigger sums suggested will be extra money to climate proof the global economy.
So, to deal with climate change might be not as high as it looks on first glance, something like 3 per cent of GDP perhaps.
There is an alternative. We don’t invest in decarbonization across all sectors in all parts of the globe, in other words we sit back, go play golf and have permanent wild parties watching the sun set.
Setting aside the suffering and misery that uncontrolled climate change would cause, the best economics indicate not investing in climate action would also be economic shot in the foot.
The Climate Policy Initiative report says: “The longer we delay meeting total climate investment needs, the higher the costs will be both to mitigate global temperature rise and to deal with impacts”.
They compare carrying on as we are with acting to keep the temperature rise no higher than 1.5C.
“Although climate investment needs are large, the amount required is a fraction of the estimated losses….from direct impacts of increased weather-related and other uninsurable damages, increased production costs, productivity losses and health costs”.
To move the needle fast, given we have just 6 years before 2030, we will need increases in government finance including to a variety of international sources.
Ones like the Green Climate Fund, the Global Environment Facility, government overseas development aid and the various small funds managed by the UNFCCC like the adaptation fund.
Governments have struggled meet a target of giving poor countries $100 billion in climate support pledged at the UN climate conference in Copenhagen in 2009. Maybe it was met in Dubai at COP28 Photo by Nupo Deyon Daniel on Unsplash
But this will never be enough—governments struggled to meet a target of giving poor countries $100 billion in climate support pledged at the UN climate conference in Copenhagen in 2009.
Some think it was only, finally met, by last year’s UN climate conference in Dubai after 13 years—but this is more a political success than a finance mobilization one.
No, what we need is private sector finance to step up big time, not for charitable reasons, but because it is in everyone’s self-interest—let the temperature soar and many will find their business models under stress and perhaps in danger of collapse.
Unfortunately, there appears to be a collective schizophrenia here among far too many banks, equity funds and others able to make a difference.
Not least when it comes to funding or not funding the very substances that are causing much of the problem: the fossil fuel companies.
Since the Paris Agreement, the world’s biggest 60 banks have poured over $5.5 trillion into the big oil companies, fueling expansion. Photo by Andrea de Santis on Unsplash
On May 13th, the latest report in a series called Banking on Climate Chaos will be released by a group of NGOs.
We don’t have the new numbers.
But last year’s shows that since the Paris Agreement, the world’s biggest 60 banks have poured over $5.5 trillion into the big oil companies, fueling expansion.
These include both private and government fossil fuel companies like Shell, Exxon Mobil, Chevron, Total Energies, Conoco Phiilips and BP and Saudi Aramco and China Petrochemical.
The general consensus is that the fossil fuel industry should at the very minimum be not bringing new coal, and oil and gas on stream.
A point repeatedly made by the International Energy Agency in their reports on hitting net zero by 2050.
And if we are to meet the safety goals of the Paris Agreement fossil fuel companies should be going beyond that by having pathways to decarbonize their operations and supply chains.
The main funders, according to the Banking on Chaos Report last year were US banks like JP Morgan Chase, Wells Fargo, Citi and Morgan Stanley.
But there are also European banks in the mix, like BNParibas, Barclays, Deutsche Bank and Scotiabank.
So, what is going on given that many of these banks say they support the Paris Agreement and some are members of something called the Net Zero Banking Alliance.
Insiders say these banks think tighter government regulation will come, so they want to support as much fossil fuel expansion as possible—and make a lot of money-- before that happens.
They are happy it seems to lock the world into more fossil fuel infrastructure in the name of profit, even if that infrastructure leads to more climate change and may soon be stranded—another definition of madness!
I asked if the report’s authors if they would be happy for a bank to support a We Don’t Have Time broadcast on the topic and the named only one-- La Banque Postale in France.
I checked: Their portfolio of fossil fuel investments has declined sharply, and according to independent certifiers, they are on track to meet their target of fully exiting fossil fuels by 2030—magnifique, but just one out of a long list.
Fortunately, La Banque Postale is not a person or investor’s only choice if they care about climate change.
A new report out this week by the Fossil Fuel Non-Proliferation Treaty with the Global Alliance for Banking on Values, who were regular guests on our shows from COP29 in Dubai, has 17 banks calling for a fossil fuel phase out including Ekobanken in Sweden and Merkur Cooperative Bank in Denmark plus some American banks.
So, we do have choices about where we bank—we can move the money away from the masters of the universe to the fathers and mothers of a better future!
There is some good news—funding for coal by banks seems to be declining generally, except perhaps for Chinese banks.
Insurance companies are also part of the story. Despite many being crucially aware of the risks to their business from growing numbers of extreme weather events, many are still underwriting fossil fuel expansion.
Many are at the same time becoming ever more risk adverse to underwrite property insurance amid concerns of climate fueled extreme weather events. Yet they are still part of the ecosystem that keeps the oil pumping busy.
Again, surely some cognitive dissonance here.
Finally let me talk about equity funds briefly.
Their last report on funds looked at 593 equity funds with over $265 billion in total net assets classed as Environmental Social and Governance (ESG) funds. They found that over 70 per cent were not aligned with the goals of the Paris Agreement.
They also looked at 130 funds theme as climate funds—55 per cent were not aligned with the Paris goals.
Companies in the funds regularly popping up include Exxon Mobil, TotalEnergies, Kinder Morgan, Halliburton and Chevron.
Without Influence Map, many casual investors in such funds managed by familiar names like Black Rock or UBS, would think they are doing good—but they are not, one might say they are even being duped.
If you want to know more, check out We Don’t Have Time’s broadcast from a recent NYC Climate Week where we featured these findings and discussed it with experts—it was good TV.
Ladies and gentlemen, let me conclude.
The coming 1 to 2 years is going to be potentially a key window in the history of humanity.
At the last UN climate conference in Dubai, where we were broadcasting daily for close to 12 days, governments kicked started the process to revise upwards their collective national climate plans.
The plans will, for the first time, include all sectors of the economy and finance is going to be a hot topic.
This process will begin in Bonn, Germany, the HQ of the UN Framework Convention on Climate Change (UNFCCC) in June when governments meet and will pass through the next UN annual climate conference in Baku in November and culminate in Brazil in 2025 at COP30.
Indeed, the finance debate has already started.
Last week at the World Bank-International Monetary Fund’s Spring meeting a group of countries led by Barbados, France and Kenya, stepped up the push of what is called the International Tax Task Force.
The aim is creating new levies on fossil fuel producers and sectors like aviation and shipping plus a levy on international financial transactions.
The aim is to support the generation of up to $2.4 trillion to support low income and emerging countries fight climate change.
In parallel, Brazil is lobbying for support under the G20 for a 2 per cent minimum wealth tax on the world’s billionaires.
We Don’t Have Time will certainly try to bring the debate to a global audience with broadcasting in June from the UNFCCC, through NYC Climate Week at COP29 in Baku.
If you think this is important, you can support our work and even be guests on our programmes if you want to contribute to the discussions and influence opinion.
So let me conclude, the money is moving but not as fast as the science says we need.
Governments have only so much money to support both domestic climate action and poorer countries who need support to meet their climate plans including adapting to the impacts many are already experiencing.
It is beyond this short snap shot to cover all the solutions.
But it is clear governments, who have signed up to all the climate science reports on the risks we are running and committed under the Paris Agreement to hold a temperature rise to no higher than 1.5C, need to exercise their policy powers.
They need to regulate whether it be on banking regulations, and they need to remove the trillions of dollars of public subsidies propping up the fossil fuel industry.
They also need to urgently ensure that there is transparency in the area of investment funds too so investors can make real choices.
Perhaps new measures, like the EU’s directive on corporate sustainability reporting will help—let’s see.
But overall progressive investors in equity funds or people with money in banks, need to stand up and be counted to ensure that their money is working for the future, rather than trapping us in the past with all the chilling consequences for every man, woman and child.
It is time to move the money!
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It is time to pursue the banks and financial institutions relentlessly. Persistent persuasion pays.
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In our own country, we were able to convince the National Power Company, which includes water and electricity, to study more than 3 billion cubic meters of very salty waters with an EC of more than 150,000 micromos and find solutions to correct and remove their salinity, of course. This plan is currently under study and has not been implemented. But its acceptance by this company was an important and effective step that was taken.
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We are currently working with two non-profits - E-liability Institute and CAM-I in the creation of a Sustainable Management methodology. This explicitly links financial metrics to environmental metrics in an operational model of organizations. Specifically expenses to GHG emissions initially down to individual products / services. Then with the inclusion of revenue and therefore margin, this provides organizations with the data needed to transition to a low emissions / zero emissions business in a financially sustainable / profitable way. This can also be used to support financing, specifically looking at Sustainability Linked Loans initially. Early days yet…will keep you posted 👍😁
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The company I work for GEMM Masterplanning uses engineering and creative financing to help commercial building owners reduce their carbon footprint. Usually the savings in energy costs more than pay for the finance costs so the transition is cash positive for the building owner. We improve the efficiency of the building add renewable energy, energy storage and backup power as well as equipment to improve the indoor air quality. We increase the value of the buildings we work on. www.gemmasterplanning.com
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Fantastic read Nick! Thank you 🙏
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@carl_barstad tx Carl..a bit heavy, but sometimes that is the nature of the beast!
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Looking forward to hearing from speakers that We Don't Have Time will bring in the programs for discussion,debate, to the whole global audience in June,etc, their voices will influence important opinions. It's that time to #MoveTheMoney.