Financing a 1.5 °C world

The clock is ticking

The session chair, Dipak Dasgupta, Distinguished Fellow, TERI, said amid a new atmosphere of climate urgency, which gives humanity only a 10-year window of climate action to arrest global warming, the financial sector will need to restructure how it assesses the perceived risk of climate investments. This fundamental paradigm change will create more space for high-quality finance, which can provide the pace, speed, and scale for the innovations needed for robust climate action.

Assessing impact

Considering the scale of projected climate investment for sustainable development action, it is also important to ensure that monies translate into impact. Along with the risk perception of the sector and its achievements, there is also a lack of clarity on the rate of return from new and innovative technologies and practices deployed, said Yvo De Boer, President, Gold Standard Foundation. Such perspectives from climate financiers need to be addressed, he said. Even the concept of a company's valuation should be revised to include current intangibles like human capital, social capital, and overall societal value. Such a holistic valuation can give investors a reason to support climate-focused companies, he said.

Incentivising Paris-compatible governance

Considering the role of private sector investment, mobilising the necessary trillion-dollar outlays will need both low rates of interest and extensive investment in carbon-resilient infrastructure, said John Roome, Senior Director, Climate Change, World Bank. Along with this policy aspect of climate finance, he also said innovations in low-carbon, climate-resilient technologies might not be considered commercially viable, but their role must be enhanced. Further on the policy front, he recommended closer cooperation with relevant planning and financing ministries to ensure climate considerations have a stronger role. The Paris Agreement, he said, must find resonance in everything done by governments.

The pace at which the NDCs are achieved through actions in both climate mitigation and resilience will establish confidence and ensure that next-generation NDCs are even more ambitious. However, governance that is compatible with the Paris Agreement will also need suitable incentives, he said, giving the example of British Columbia. While the Canadian province has instituted a carbon tax, it also provides a rebate to households. The right kind of financial response from the people that can fund the climate transition will, therefore, need to be based on clear consideration of people's own imperatives.