Climate change is a complex global problem, and solutions will come from all sectors. But finance may just be the key to decarbonising the economy.
The transition to green, clean energy in a net-zero carbon world would be an impossible feat without a way to finance it.
This is why Chief Executive of Scotland’s Chartered Banking Institute, Simon Thompson believes that a “significant commercial opportunity” exists for the world’s finance sector as the net-zero transition occurs over the next 20 to 30 years.
Thompson joined Guyana’s local private sector body, the Georgetown Chamber of Commerce and Industry (GCCI), for a discussion on ‘Green and Sustainable Finance’ on Wednesday.
The main goals of the Paris Climate Agreement – net-zero targets and promoting climate-resilient development – are more commonly known. But it also zeroes in on the crucial role of the banking and finance sector in leading the transition.
The business executive pointed to section 2.1 (c) of the Agreement, outlining that governments must make flows of finance consistent with a pathway towards low greenhouse gas emissions and climate-resilient development.
“And this third lesser-known objective of the Paris Agreement is critical to achieving the first two objectives, as the financial sector will need to play a leading role in helping the transition/decarbonisation of every economic sector to sustainable, low carbon models,” he pointed out.
For that transition, significant revenues will be needed; an estimated six to seven trillion each year over the next 20 years to fund mega climate initiatives. And around 78% of that funding will have to come from private financial entities, creating a massive opportunity pool to dive into, Thompson shared.
“Because this is not something that governments can finance… and this is why many financial institutions are so interested in green finance, because of that commercial opportunity that exists,” he continued.
Many other reasons exist to explain why the financial sector is jumping to green finance, but in Thompson’s view, if the sector can mesh both its environmental and moral imperatives with the commercial opportunities, it would create “an unstoppable force” to mobilise climate finance.
“And this would embed sustainability firmly in finance so that all finance is green finance, and that every professional and financial decision takes account of climate change,” the banking executive said.
The topic of climate financing was also ventilated a few days ago by Guyana’s President, Dr. Mohamed Irfaan Ali as World Environment Day celebrations were marked.
The developed world had pledged some US$100 billion annually in climate finance by 2020 to support developing climate-resilient initiatives in developing countries. But years later, no headway has been made on the commitment.
Therefore, the President noted that Guyana is exploring every revenue-generating activity to pursue climate adaptation and mitigation.