Climate Avengers to kickstart 2021 year of climate finance

As the world works to recover from the COVID-19 pandemic, there is a rapidly growing demand and call for new financial products to reduce carbon emissions and mitigate climate-related risks. And the urgency to do so cannot be more stark according to this new scientific study which states that:

We have less than 10 years to reduce our carbon emissions and not deplete or carbon budget.

The amount of financing that will be required is staggering—the IEA (International Energy Agency), estimates that transitioning to a low-carbon economy would require $3.5 trillion of investment per year through 2050 in the energy sector alone.

Therefore it was great that the newly appointed US Special Envoy on Climate John Kerry discussed the need for more climate finance on two different platforms.

The first was in a conversation with Robert Downey Jr's Footprint Coalition, where he refers to John Kerry as (SPEC)-a Marvellous new Avenger name. And the other, an inaugural speech at B20, the Business Coalition providing guidance for the G20 later this year in Italy. Here are nuggets of his first public speech.

• In this decade through 2030, the world will need more than $1 trillion in annual investment in clean power systems to speed the energy transition.
• Sustainable investment funds surpassed $1 trillion for the first time on record, and the boom in ESG investing is only beginning, as fund inflows quadrupled in 2020.
• Venture capital investments in innovative technologies to combat climate change also surged to a record high in 2020.

Global investment in new clean power capacity is set to exceed $10 trillion through midcentury, more than six times the investment in dirtier options. John Kerry

There are certain signs we are heading in the right direction as Credit Agricole expects Sustainable Finance to see 55% Growth in 2021. This will lead to an increase of about $726 billion in 2021, compared to the amount issued in 2020 said Damien de Saint Germain Head of Credit Research.

As for philanthropists, Elon Musk announced with one tweet he will give away $100m to the best carbon capture technologies. The hopes are that more and more philanthropists will provide funding for climate technologies, either to de-risk their startup phase, or accelerate their development. As a reminder, Jeff Bezos, gave out the first grants from of his $10bn Earth Fund last month.

And Bill Gates not only raised $1bn for his Breakthrough Ventures Fund, but is about to launch a book on climate finance "How to Avoid a Climate Disaster". It will center on a useful and novel financial concept that can help society and investors understand finance and investments for climate change in a better way: Green Premiums. Green Premiums can lay the framework for investors and consumers alike, and will make it easier for everyone to invest in climate technologies.

As for politics, President Biden made sure that climate change was one of the main focus of his first day in office with several executive orders that put the US back in the Paris Accord and made the US government and economics more climate-friendly. This included the nomination of a Climate Avengers Team, and include another super team of climate economists named by the new Secretary of Treasury Janet Yellen.

The impact of climate change could have major impacts, creating stranded assets, generating large changes in asset prices, and credit risks that could affect the financial system.

Janet Yellen, US Secretary of Treasury

Policymakers in the EU vowed to fight fossil fuel investments. An unprecedented move that will involve not just lobbying, but a massive foreign diplomacy strategy with countries and investors to massively divest or discourage investments in fossil fuels globally.

The urgency of the climate crisis demands that the European Union turn its world-leading climate agenda into foreign policy. Werner Hoyer, President, EIB

In addition the EU has already committed to make the European Investment Bank into a Climate Bank by committing to raise €1tr by 2030.

And finally, there was a stark reminder of where we stand in terms of climate finance. The seminal report written by Boston Consulting Group and the Global Financial Markets Association last month: "Climate Finance and the Real Economy" was the focus of The Asset, and how Asia is the continent with the most demand and need for climate finance at $66tr.

Climate finance must grow by $3-5tr per year globally to meet the Paris Agreement targets, and we are currently off by a factor of 5-8. Michael Mathres

Although there are encouraging signs that we are heading in the right direction, it will require a massive efforts by all capital markets, philanthropists and policymakers to scale up, build momentum and attain this climate finance target. Avengers! Climate finance here we come!

References & links (in no order):

New research suggests 1.5c target will be out of reach without greener COVID 19 recovery plans - The Conversation - https://theconversation.com/new-research-suggests-1-5c-climate-target-will-be-out-of-reach-without-greener-covid-19-recovery-plans-151527

Climate Finance Must Grow by $3-5Tr per year globally - The Asset - https://www.theasset.com/treasury/42721/climate-finance-must-grow-by-us3-5-trillion-per-year-globally

VIDEO: Conversation with John Kerry - Footprint Coalition - https://www.instagram.com/tv/CJ_tbFHlLBG/?igshid=10wjpyaew3jq3

Yellen vows to set up Treasury team to focus on climate - Politico - https://www.politico.com/news/2021/01/19/yellen-treasury-department-climate-change-460408?

Climate Finance and the Real Economy - GFMA - https://www.gfma.org/gfma-and-bcg-publish-report-on-climate-finance-markets-and-the-real-economy/

EU Vows to work against fossil fuels - Bloomberg - https://www.bloombergquint.com/business/eu-will-vow-to-work-against-fossil-fuel-investments-globally

EIB Group Climate Bank Roadmap - European Investment Bank - https://www.eib.org/en/press/all/2020-307-eu-member-states-approve-eib-group-climate-bank-roadmap-2021-2025

Paris Climate Agreement - White House - https://www.whitehouse.gov/briefing-room/statements-releases/2021/01/20/paris-climate-agreement/

Bill Gates on Climate Change - TIME Magazine - https://time.com/5930098/bill-gates-climate-change/

How to Avoid a Climate Disaster - Bookshop.org - https://bookshop.org/books/how-to-avoid-a-climate-disaster-the-solutions-we-have-and-the-breakthroughs-we-need/9780385546133

Jeff Bezos names first recipients of his $10bn Earth Fund - CNBC - https://www.cnbc.com/2020/11/16/jeff-bezos-names-first-recipients-of-his-10-billion-earth-fund.html

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