NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Thursday, September 19, 2019

The Climate Finance Leadership Initiative (CFLI), which was formed by UN Special Envoy for Climate Action Michael R. Bloomberg at the request of UN Secretary-General António Guterres, today released Financing the Low-Carbon Future. The new report is aimed at mobilizing private climate finance at the scale and speed needed to support an orderly transition to a low-carbon economy. Drawing on the direct perspective of some of the world’s largest institutions across the investment chain, including private banks, asset managers, and asset owners, the report identifies concrete opportunities for leadership by the public and private sectors to meet the objectives of the Paris Agreement.

The group, whose members include Allianz Global Investors, AXA, Enel, Goldman Sachs, Japan’s Government Pension Investment Fund (GPIF), HSBC, and Macquarie, will formally deliver the report to the Secretary-General at next week’s Climate Action Summit and will announce actions tied to the solutions recommended in the report at the Bloomberg Global Business Forum on September 25.

“The private sector has a critical role to play in combating climate change, and mobilizing the global financial system is essential to building a low-carbon future,” said Michael Bloomberg, founder of Bloomberg LP and Bloomberg Philanthropies. “More and more business leaders recognize that economic growth and climate action are not two competing ideas – they go hand in hand. And the solutions presented in this report provide a roadmap for both reducing emissions and strengthening economies.”

“The widespread effects of climate change are too significant to ignore. Mobilizing climate finance is imperative to addressing the most important challenge of the 21st century,” said Christiana Figueres, Former Executive Secretary of the UN Framework Convention on Climate Change and Vice-Chair Global Covenant of Mayors for Climate & Energy. “As we work with cities to increase the pipeline of investment ready projects, the solutions put forth by the CFLI in their report will ensure that private finance is ready to meet them. I applaud the work of the CFLI in taking a leadership role in the transition to a low carbon economy.”

Financing the Low-Carbon Future highlights the challenges of increasing new, low-carbon investment while also actively transitioning carbon-intensive sectors. The actionable, near-term solutions the report presents emphasize the importance of partnerships across private finance, public finance, and public policy to enable and support an orderly transition, with a particular focus on investment in emerging markets. The report highlights various financing strategies needed in sectors where viable clean energy business models already exist, versus industries in which innovation in technology and policy is particularly necessary. Recognizing the transition needed within the financial sector itself, the report also previews the tools and incentives for more systematically aligning financial portfolios with a low-carbon future.

“Transitioning to a low-carbon future is one of today’s great challenges. The imperative to achieve new levels of collaboration, creativity and innovation extends to those of us with the capacity to provide financing,” said Andreas Utermann, CEO of Allianz Global Investors.  “We must embrace greater co-ordination between public and private sector capital and place more emphasis on mobilizing capital for climate solutions in developing markets. While easier said than done, this initiative offers practical steps we can take to unlock the financial support to secure the future.”

“The transition to a low-carbon economy requires investors and corporates to work together in order to deliver climate finance solutions that can be brought to scale,” said Thomas Buberl, CEO of AXA Group. “We are well aware of the challenges this entails, especially in emerging economies where these solutions can have the most impact. This is why we are delighted to have been able to bring AXA’s experience in this field to the table, as well as learn from the experience of CFLI’s other partners. The CFLI clearly demonstrates that tangible and targeted action is possible when different businesses collectively share their expertise and solutions.”

“The financial community is getting increasingly aware of the risks related to climate change but financial flows to low-carbon solutions are not growing at the required pace,” said Francesco Starace, CEO and General Manager of Enel. “We believe that this Climate Finance Leadership Initiative (CFLI) will identify what is needed to mobilize financial flows to accelerate low carbon investments and support the transition of more carbon intensive sectors. By joining the CFLI, as the world’s largest private player in renewables, we can share our experience and the insight to address the challenges and direct private-sector capital flows in line with the goals of the Paris Agreement. The global business and financial community should be focused on concrete actions to be implemented rapidly.”

“At Goldman Sachs, we have had a long-standing commitment to addressing climate change, having mobilized over $100 billion toward renewable energy and clean technology solutions around the world.  But the urgency and scale of the challenge is clear, and we need more ambitious action,” said David M. Solomon, Chairman and Chief Executive Officer of Goldman Sachs. “We are launching a dedicated effort that will accelerate sustainable finance across climate transition and inclusive growth, and are partnering with CFLI members to scale innovative climate solutions.”

“Our latest TCFD-compliant ESG Report shows GPIF’s global portfolio is in line with >3℃ scenario. As a universal owner holding approximately 5,000 company stocks and 3,400 bond issuers worldwide, our portfolio represents where the world is heading,” said Hiro Mizuno, Executive Managing Director and CIO of GPIF. “We need more dramatic and quick actions to mobilize capital to support changes needed. CFLI’s report identified many challenges and possible solutions, which illustrate our common goals and responsibilities for our beneficiaries. I am pleased to contribute to such an important work to deliver remarkable message to the world.”

“The climate challenge is large and the window of opportunity is short. Initiatives like CFLI are putting the foundations in place to accelerate the transition to a low-carbon economy. With an estimated US$90 trillion of infrastructure investment expected by 2030, working together now will enable market participants to price climate risk and effectively allocate capital to deliver a low carbon future,” said Noel Quinn, Group Chief Executive, HSBC. “At HSBC, we have committed to providing US$100 billion of sustainable finance by 2025. To date, we have put US$36.7 billion to work and recognize there is much more to be done, which is why we are committed to being part of such important initiatives like CFLI.”

“The report shows that one of the biggest challenges to mobilizing private climate finance is the lack of a sufficiently strong pipeline of investible projects,” said Shemara Wikramanayake, Chief Executive Officer of Macquarie Group. “We look forward to building on the work of CFLI, with partners in the public and private sector in mature and emerging markets, to deliver the next generation of renewable energy projects with greater scale and urgency.”

For more information on the CFLI, and to read the full report, please visit Bloomberg.com/CFLI.

Photo courtesy of Sudipto Sarkar.