Private sector needs to step up to fund climate transition, Cop28 hears

At the Cop28 climate conference in Dubai, schisms have developed between those advocating the continuing use of some form of fossil fuels and others calling for their elimination.

More than 100 countries committed to a global pledge aiming to triple renewable energy capacity by the decade’s end. Yet the abstention of China and India, two of the world’s largest economies, further underscores the contrasting priorities among countries and regions.

However, most participants at the UN climate summit agree that any solution aimed at hastening the transition to cleaner energy is incomplete without private capital.

Climate finance has in fact taken the centre stage, with governments, businesses and development banks announcing plans to mobilise billions of dollars.

“There isn’t a meeting I have with a CEO or chairman of a business where this isn’t a topic,” Noel Quinn, group chief executive HSBC, said during a panel session on Monday.

“I’m optimistic … on the basis of the conversations I have with my clients. They’re talking about the need to invest in sustainable infrastructure [and] the need to invest in new technology to make their business models have a lower carbon footprint.”

By 2030, emerging markets and developing economies will require $2.4 trillion every year to address climate change, according to the Climate Policy Initiative.

Meanwhile, Deloitte has said investment of $5 trillion to $7 trillion a year is needed until 2050 in the energy sector to drive the transition but less than $2 trillion is currently spent each year.

Institutional investors control assets worth more than $200 trillion, only 0.3 per cent of which is going towards climate financing.

“That is because they have a responsibility to take care of their populations,” said Ray Dalio, founder of Bridgewater Associates, a hedge fund with about $125 billion in assets.

“I think the important thing is when you look at who’s got the money, you just can’t go get the money, you have to convert that into productivity,” he told a Cop28 panel session.

The International Monetary Fund and the World Bank have identified public-private risk-sharing as key to fostering private climate investment in emerging markets.