Drive to find solutions for funding net-zero transition gaining momentum, HSBC chief says

The momentum to find financing solutions for the transition to carbon neutrality has picked up pace but public and private capital flows from the developed world to emerging nations has to take off significantly for the world to achieve its climate goals, senior executives told the annual investment forum in Saudi Arabia.

“We have to find means to transmit capital from the developed to the developing [countries],” Noel Quinn, group chief executive of the HSBC, told the Future Investment Initiative conference in Riyadh.

“Capital in one part of the world needs to find a project in another part of the world for nature-based solution”, as nature is part of the broader climate agenda, he said.

Covid-19 intensified the drive to find funding solutions for the transition to a greener economy and made policymakers realise how a natural event can have a “devastating impact on the global economy”.

However, the technological innovation required for the world to transition to a net-zero carbon economy requires scaling up and significant capital investment that cannot be fully funded either by the public sector or private sector alone. “It has to be [both] public and private sector on a blended finance basis,” Mr Quinn told the forum.

Saudi Arabia’s Public Investment Fund’s global head of Capital Finance Fahad Al Saif, chief executive of Gabon’s sovereign wealth fund Akim Daouda, chief executive of the London Stock Exchange Julia Hoggett and John Green, chief commercial officer of asset management firm Ninety One, also joined the discussion.

“I’m basing my optimism on the conversations I’m having with my own customers and governments. I believe, acceleration [to deal with climate emergency] is taking place,” Mr Quinn said.

Even investors are eager to see the change and 60 per cent of client conversations are dominated by “what are you doing to decarbonise portfolios, what are we doing about transition, how we are going to meet our net-zero goals”, said Mr Green, whose company manages more than $130 billion in assets.

However, there is a lot more to be done both on policy and financing fronts for the world to be able to achieve its carbon emission goals by mid-century.

Total spending on climate finance in 2019-20 reached nearly $650bn, a 13 per cent annual increase against the target of about $4 trillion by 2030, according to a Global Policy Initiative report.

“Action in terms of real financing is not there,” Mr Green said. “We are not getting there in terms of climate spending.”

The developed world needs to help emerging nations deal with their climate risks as they accounted for only $150bn of the $650bn spending.

“Developing economies today account for more than 50 per cent carbon emitted,” Mr Green said. “They received less than 20 per cent of the financing and most of that came from banks.”

“There are problems in the way long-term capital is thinking about portfolio levels that is working against financial investment behind this problem. We have to change that.

“Companies, governments and regulators are facing increased pressure to invest in building back a greener economy in a bid to achieve net-zero carbon emission goals by 2050,” he said.