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Environmental researcher Peter Gudde asks how the the fight against climate change can be financed

We have witnessed over the past few weeks some really unedifying financial behaviour, whether it’s been owners of big football teams, politicians or high-profile individuals.

But the story that hopefully sends a positive money message came from an announcement by former Bank of England Governor Mark Carney of the launch of the Glasgow Financial Alliance for Net Zero; a bit of a dry subject but when it comes to tackling climate emissions like anything, money talks.

This new alliance has been formed ahead of the UN Climate Summit, COP26, in Glasgow this November and brings together 160 companies from across the financial sector with a combined asset value of 70 trillion US Dollars. These include HSBC, Lloyds, Barclays, Citi, Morgan Stanley and Bank of America and insurance institutions including Axa, Munich Re, and Swiss Re.

Peter Gudde
Peter Gudde

At the online launch John Carey, the US Special Climate Envoy to COP26, said ‘it is patently clear that no government in the world has the ability to summon the finance on its own. There is no budget of any country of any kind to do what we need to do’. He has that one right given the impact that Covid-19 alone has had not only on lives but on public coffers and the bank balances of businesses and households.

He went on to say that the only way to finance climate action at the scale necessary would be with money from private sector investment.

Now these are eye-achingly big numbers that are being thrown about. The investment globally to tackle the climate crisis is estimated at between 1-2 trillion dollars every year for next 30 years. The UK Committee on Climate Change puts the price tag for the UK at around 50 billion pounds every year to 2050 with the current gap on annual spend to achieve this put at 33 billion pounds each year. Ouch.

Building and generating new power using solar and wind is now cheaper than conventional fossil-fuel based technologies
Building and generating new power using solar and wind is now cheaper than conventional fossil-fuel based technologies

But as always, this way of valuing the investment that is needed does not show both sides of the equation or give any context. Firstly, some of the spending needed would happen anyway but on climate-unfriendly things like fossil-fuel powered power stations or replacing building heating systems without thought for cutting emissions. Building and generating new power using solar and wind is now cheaper than conventional fossil-fuel based technologies, although we have to address some of the variabilities of supply created by this shift.

This commitment to move capital towards climate actions by some of the global investment institutions will ripple throughout the finance system not just on the major infrastructure.

Just taking the perspective of a small business or householder considering improving energy efficiency or installing renewable energy, the fact that you have to pay before you see the results is a big blocker, as is the way that you pay.

Many would like this stuff paid for from the public purse without any need for a personal contribution. Having worked on energy efficiency for more years than I would care to admit, there were times when the improvements were free and, even then, we could not give it away. The message is clear that public funding alone is not the answer, nor is making money available without persuasive and justified arguments to encourage uptake along with really high-quality products and people to do the work.

That’s the difference between knowing the cost of something and appreciating its value, I guess. If we can find ways to finance such things as energy efficiency and zero carbon that means they are valued, deliver financial benefit and come with a great customer experience then it can only help drive forward uptake.

Maybe this year will see the big money start to flow towards Net Zero.

-- Peter Gudde is an energy advisor and environmental researcher

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