Our collective response to climate disruption will shape the future of finance, innovation, and everyday wellbeing.
The Pre-COP meetings in Costa Rica made clear that stakeholders and major institutions are looking forward to new and more ambitious commitments from nation-states at COP25 in Chile in December. Chile’s COP25 Presidency has called for integration of ocean and cryosphere and land use science into national climate plans.
- There is a recognition that we need upgraded ambition, innovation and collaboration from cities, regions, banks and international financial institutions, and industry.
- Major industrial cities will need to overhaul buildings, energy, transport, and infrastructure, with unprecedented urgency.
- Developing market cities will need to “leapfrog” the pollution-heavy stages of industrialization and build clean infrastructure oriented toward a circular, zero-waste economy.
Emerging financial instruments and blended finance strategies can accelerate the phase-out of polluting practices and convert the costs of phase-out into funding for clean innovation. Institutions, investors, businesses, and public authorities, are increasingly calling for such strategies to ensure they—and their constituencies—are not left behind.
Net-Zero by 2040 is Common Sense
Defining targets, timelines and transition strategies is far more difficult if we aim to contribute the least possible to the overall response, while seeking to do “our fair share”. More ambitious visions simplify the hard work of comprehensive decarbonization.
Recognizing that we cannot afford, as a world community, to fail in our efforts to avoid the worst climate impacts, net-zero by 2040 is a common-sense target any entity can reasonably aim for. We are now in the phase of the transition when doing more than our share makes more sense than doing anything less.
IMF calls for high carbon prices, revenue return
The International Monetary Fund exists to prevent the collapse of national government budgets. During her inaugural Town Hall with Civil Society Observers as IMF Managing Director, Kristalina Georgieva said she would continue and expand the Fund’s work on macrocritical areas of concern (which impact fiscal solvency), citing income inequality, gender equality, food system transformation, and climate disruption.
To make carbon taxes politically feasible and economically efficient, governments need to choose how to use the new revenue. Options include cutting other kinds of taxes, supporting vulnerable households and communities, increasing investment in green energy, or simply returning the money to people as a dividend.
The $5.4 trillion opportunity
The Resilience Intel team is aggregating all known outstanding climate-related finance commitments, and then working to map those commitments to:
- Mainstream financial sector information flows;
- Real-time evolving Earth-science observational data;
- Climate-aligned and SDG-related action targets;
- The likely market value of new technologies and business models—some of which have no clear historical reference.
The Resilience Intel aggregate of outstanding climate-related finance commitments now stands at $5.42 trillion—most of which is still waiting to be capitalized and/or deployed.
A few key insights emerge from this aggregation effort:
- Just 7 of the Multilateral Development Banks (MDBs) have committed $2.658 trillion in climate-smart finance (49% of the total tracked).
- Banks and financial institutions have committed $1.27 trillion (23.4%).
- Climate-aligned bonds and green bonds, tracked through the Climate Bonds Initiative, now add up to $1.449 trillion (26.7%).
- Among leading MDBs, 20% to 30% of development finance is being committed to climate-aligned priorities. (We now need to know whether the remaining 70% to 80% is climate positive, neutral or negative.)
Beyond the $5.42 trillion aggregate, Bloomberg is reporting that the green economy in the US alone is now worth $1.3 trillion. While conventional financial asset holdings are stalled and the IMF is warning of a disruptive slowdown in global economic growth, the climate-smart finance opportunity is rapidly growing and appears unparalleled.
We need all actors to be moving toward 100% climate-smart finance. MDBs should strive to align all of their investments with climate and resilience imperatives and leverage their funds to catalyze at least 4-fold their own total commitment, in support of significant increases in localized climate ambition.
Resources and Strategies
Everyday mainstream deployment of climate-smart finance requires the routine delivery of climate intelligence to decision-makers at various scales and scopes of authority. Finance ministers and central bankers need this information, as do commercial banks, insurers, and local public authorities. Farmers and small business owners also need climate intelligence attuned to their situations and needs.
Resilience Intel is working with partners to design and deploy “Situation Rooms” for integration of climate science, socio-economic, financial, and other sustainable development-related data. These knowledge exchange networks can operate in brick-and-mortar technology-enabled facilities, institutions of shared learning and innovation, or as ongoing discussions among dispersed partners or regular meetings among stakeholders.
Fiscal policy, development finance, intergovernmental negotiations, urban planning and the future design of rural landscapes, are all moving toward integration of science insights to reduce risk and secure sustainable and inclusive future wellbeing.
This report was produced by the Resilience Intel team, with extensive background research by Resilience Intelligence Fellow Shantanu Agrawal.