Spending our way out of climate catastrophe

By Dr Mahmoud Mohieldin, UN Climate Change High-Level Champion for?COP27?

Achieving the objective of the Paris Agreement to limit global temperature increases to 1.5°C from pre-industrial levels requires a full-scale transformation of our economies.

Every company, bank, insurer and investor will have to adjust their business models, develop credible plans for the transition and implement them.

There is already growing ambition and action from Non-State Actors (NSAs). The world’s largest asset owners and managers, controlling over US $37 trillion, have joined the Climate Champion’s UN-backed Race to Zero campaign. Its aim is to rally leadership and support from cities, regions, investors for a healthy, resilient, zero carbon recovery that prevents future threats, creates decent jobs, and unlocks inclusive, sustainable growth.

However, unlocking systemic change will require coordinated and ambitious commitments across the entire financial system.?

At the beginning of 2021, not a single bank had set a science-based 2030 target. Today, through the Glasgow Financial Alliance for Net Zero (GFANZ) more than 500 members spanning 51 countries are committed to transitioning the global economy to net-zero greenhouse gas emissions.

In addition, GFANZ strongly urge financial institutions to include deforestation in their transition planning. Deforestation accounts for 11% of global greenhouse gas emissions, surpassing aviation and cement production.?

According to recent studies , researchers estimate that reforestation and reduced deforestation could yield US $6-40 trillion in savings. However, to ensure this transition is just, direct capital needs to be channelled to countries which currently rely heavily on palm oil, soy, cattle and other commodities often tied to deforestation.

Likewise, financial institutions need to wake up to the investment opportunities in some emerging market and developing economies. Investors are missing out due to a lack of knowledge and confidence in bankable, scalable projects.

To address this, the Climate Champions recently convened five regional finance forums in Africa, Asia, Europe, South America and the Middle East to accelerate public and private investment around economically robust, scalable projects aligned with the goals of the Paris Agreement.

The result was a compendium of fifty projects demonstrating that investable opportunities exist in both developed and developing countries. This comes in addition to a second, extended list of projects based on regional priorities.

There’s no doubt that additional finance needs to flow into those countries least responsible for but suffering the most from climate change.

The Africa Group of Negotiators (an alliance of African member states that represents the?interests of the region in the international climate change negotiations) has estimated that the continent needs US $3 trillion in order to implement its nationally determined contributions (NDCs) under the Paris Agreement.

Developed countries have provided US $80 billion of the US $100 billion in climate finance they pledged to contribute annually to developing countries; of this, less than US $20 billion was provided in total to Africa between 2016 and 2019.

Voluntary carbon markets (VCMs) can play a role in filling this gap while driving a sustainable, inclusive economic transformation in Africa.?

The Africa Carbon Markets Initiative (ACMI) is a coalition of African leaders, CEOs and carbon credit experts formed to develop a roadmap for how to scale African VCMs in the years ahead.

It’ll be officially launched at COP 27 in collaboration with The Global Energy Alliance for People and Planet, Sustainable Energy for All, and the UN Economic Commission for Africa. The UN Climate Change High Level Champions will be a supporting partner.

Carbon credits and associated products have the potential to strengthen African economies and advance the global fight against climate change while creating jobs, protecting ecosystems and expanding energy access.

Governments should be encouraged by the rapid progress made in the real economy and respond by creating the conditions to collaborate with non-state actors so we can all go further, faster.

A recent report by the International Monetary Fund (IMF) ?confirms the economic imperative for tackling climate change head on. It states there’s an “overwhelming” economic case for tackling climate change and that “any short-term costs will be dwarfed by the long-term benefits (with respect to output, financial stability, health) of arresting climate change.”

As United Nations Secretary General Antonio Guterres recently said “ The climate crisis is killing us. COP 27 must deliver a down-payment on climate solutions that match the scale of the problem.”