Fi­nan­cial sec­tor needs to act on cli­mate change

The Irish Times - Business - - BUSINESS NEWS - KEVIN O’SUL­LI­VAN En­vi­ron­ment & Science Ed­i­tor

The need for fi­nan­cial sys­tems to change to ad­dress cli­mate is­sues is ob­vi­ous given just 100 com­pa­nies are re­spon­si­ble for 70 per cent of global car­bon emis­sions, and 86 per cent of global in­vest­ments have been made in “a non-sus­tain­able way”, a sum­mit on cli­mate in­no­va­tion in Dublin was told yes­ter­day.

Ad­dress­ing the Euro­pean Cli­mate In­no­va­tion Sum­mit at Dublin Cas­tle, Sasja Bes­lik, head of group sus­tain­able fi­nance with Nordea in Swe­den, said a greater sense of ur­gency and po­lit­i­cal lead­er­ship was re­quired to ad­dress these is­sues.

“We know what’s un­sus­tain­able and what so­lu­tions are vi­able. What do we need to know? What do we need to dis­cuss? It’s quite ob­vi­ous. Yet the fun­da­men­tals of fi­nan­cial sys­tems have not changed,” he said.

This year’s sum­mit, or­gan­ised by EIT Cli­mate-KIC, Europe’s main cli­mate in­no­va­tion agency, is fo­cus­ing on in­no­va­tion in the global fi­nan­cial sys­tem needed to ac­cel­er­ate cli­mate ac­tion. Mr Bes­lik said it was im­por­tant not to over­com­pli­cate the re­sponse to global warm­ing, but a new line of ques­tion­ing was needed on the pur­pose of the fi­nan­cial in­dus­try and the mar­kets econ­omy. He noted an ab­sence of dis­cus­sion about a so­cial con­tract with in­dus­try, and on tools needed to tackle cli­mate change.

Econ­o­mist Prof Mar­i­ana Maz­zu­cato of Univer­sity Col­lege Lon­don said pol­icy-mak­ers needed to shift fo­cus from fill­ing in­vest­ment gaps to cre­at­ing new tra­jec­to­ries for am­bi­tious low-car­bon in­no­va­tion.

Sus­tain­able growth

“A mis­sions-led ap­proach should be at the heart of ef­forts to align the econ­omy with cli­mate and sus­tain­abil­ity goals,” she said. This meant go­ing be­yond growth rate to smart growth with the help of bet­ter in­no­va­tion, sus­tain­able growth that was “more green”, and in­clu­sive growth mind­ful of those who were dis­ad­van­taged. It re­quired go­ing be­yond fix­ing mar­kets and sys­tems fail­ures to forg­ing a new re­la­tion­ships be­tween the pub­lic and the pri­vate sec­tor, where co-in­vest­ment was em­braced and cen­tral banks were lead­ing the way rather than be­ing the lender of last re­sort.

Dr Kirsten Dun­lop, CEO of EIT Cli­mate-KIC, said the re­cent UN re­port on lim­it­ing global warm­ing to 1.5 de­grees above pre-in­dus­trial lev­els “should leave us in no doubt the fi­nan­cial sec­tor has a make or break role in avert­ing cat­a­strophic cli­mate change”. “Di­vest­ment can get us only so far. We now need to iden­tify 1.5-com­pat­i­ble so­lu­tions, and drive in­vest­ment and up­take much more quickly. We need the fi­nan­cial sys­tem to drive struc­tural and be­havioural change.”

Dr Dun­lop said the sum­mit would sur­face “some of the ur­gently-needed frame­works, eco­nomic mod­els and sys­tems in­no­va­tions that sup­port the fi­nan­cial sec­tor in this new mis­sion”.

UK Green MEP Molly Scott Cato said in the tran­si­tion to de­car­bon­i­sa­tion the most im­por­tant re­quire­ment was clear sig­nals to fi­nan­cial mar­kets, es­pe­cially as cer­tain fi­nan­cial as­sets would lose their value, such as fos­sil fu­els. An or­derly tran­si­tion was also needed to avoid a rapid col­lapse in fos­sil fuel stocks. Al­ready it was clear that coal was first to go, and was be­com­ing “a stranded as­set”.

There was also a need for bal­ance be­tween pub­lic and pri­vate sec­tors, and ac­knowl­edge­ment some ar­eas where in­vest­ment was re­quired would not make a profit; so pub­lic fi­nance was needed.

The fun­da­men­tals of fi­nan­cial sys­tems have not changed

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