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COP27: Financing Climate Action

November 03, 2022

Money matters to the mission

Financial resources and sound investments are needed to address climate change, reduce emissions, promote adaptation to impacts and build resilience. The benefits from these investments dramatically outweigh any upfront costs.

Pre-pandemic studies have shown that investments in climate action would go far toward building a sustainable economy. According to World Bank data from October 2019, the world must invest significantly in infrastructure – about USD 90 trillion by 2030. However, it can recoup these investments. Transitioning to a green economy could unlock new economic opportunities and jobs. Investing USD 1, on average, yields USD 4 in benefits. The New Climate Economy Report, issued in 2018, found that bold climate action could yield a direct economic gain of USD 26 trillion through 2030, compared with business as usual.

Investment decisions made now will determine whether we create or destroy wealth and potential paths to prosperity.

Increased interest from the private sector

There has been a surge in interest from companies and some major investors in adopting sustainable business plans compatible with a 1.5°C future, as decision-makers recognize the vast growth opportunities in the global transition to a decarbonized economy by 2050. However, most companies and investors are still in the early stages, and more progress is needed.

Continued underestimation

Many investors, banks and companies continue to underestimate the risks of climate change and are still making short-sighted decisions to expand investment into carbon-intensive assets. A vital way to break the link between greenhouse gas (GHG) emissions and economic activity is to change the energy supply mix, transitioning from fossil fuels to renewable energy sources.

Identifying and managing climate risks and opportunities remains a crucial undertaking to advance low-carbon, climate-resilient growth. Climate risk disclosure and reporting frameworks, such as the Task Force on Climate-Related Financial Disclosures (TCFD), can allow financial actors and companies to address climate risks and benefit from transitioning to low-carbon, climate-resilient economies.

The need for a new financial system

According to UN Special Envoy on Climate Action and Finance, Mark Carney, a new and sustainable financial system is slowly being built that will provide funding for private sector initiatives and innovations, which, in turn, could amplify the effectiveness of governments’ climate policies.

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