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COP27 Daily Insights - Day 4: Finance Day - funding gaps, carbon credits and the missing $100 billion.

By Dafydd Rees
09 November 2022

By Dafydd Rees

There’s been a focus on the trillion-dollar funding investment gap facing poorer countries and details of a new US global carbon credit trading initiative to funnel private capital to the developing world.

Climate finance is firmly in the spotlight at COP27, but Sharm El-Sheikh has not seen much of the Wall Street titans who attended last year’s event in Glasgow. A political backlash in the United States, coupled with navigating the issues of energy security and affordability has made this year’s event a far more complex and difficult challenge for the CEOs of the world’s biggest financial institutions.    

Yet attention has been firmly focused on the role of banks, investors, and insurers, and how their money can make a difference in scaling up solutions to the global climate change agenda. Today, the US climate envoy John Kerry has been advocating his latest solution; a new framework, to be called the Energy Transition Accelerator, provides carbon credits to scale up private capital investment in the renewable energy sector of developing countries. This plan already has the backing of large US corporates and philanthropic organisations such as the Bezos Earth Fund and the Rockefeller Foundation, though the reaction of environmental groups has been mixed. 

The United Nations has published a list of projects in the developing world worth a total of $120 billion that investors are able to fund right now. A report commissioned by the UK and Egyptian governments, as former and current COP hosts, says that by the end of the decade developing countries need to secure an additional $1 trillion in external financing for climate action. The charity Christian Aid is warning that climate change could cut Africa’s economic growth by two thirds by the end of the century.

It's been revealed that there have been informal talks between the world’s two biggest economies, the USA and China, at COP27 despite the political tensions between the two countries. China may be willing to contribute to a compensation scheme for developing nations which have suffered “loss and damage” due to the climate crisis, according to the Chinese official Xie Zhenhua. However, China has also stated that peak emissions for building materials such as concrete, cement and steel will not now be reached until 2030, rather than the previously stated date of 2025.   

The day began with a LinkedIn Live discussion chaired by SEC Newgate’s Naomi Kerbel at the Bankers for Net Zero pavilion. It featured a discussion between David Marriage, Head of Disruption and Innovation for Sustainability at PwC, and Rob Gardner, Director of Investment at St James’s Place and board member. 

Rob Gardner sought to highlight the need for a common language for sustainability and the importance of a standardised way in which to interpret financial data. It is only then that the public and the politicians can understand the trade-offs and complexity which lie at the heart of the climate change agenda. The UN has already argued that continued fossil fuel investment is incompatible with the net zero agenda.

David Marriage also emphasized the need for transparency, and how data can help banks and SMEs to understand their own carbon footprint and the impact of emissions throughout their supply chain. 

Noticeable on Finance Day by its absence, was any reference to the repeated failure by the world’s wealthiest nations to live up to the $100bn climate investment promise which was such a source of controversy and debate at the COP26 climate summit in Glasgow.  The pledge from rich nations made over a decade ago to provide $100 billion in annual investment to the rest of the world has still not been met.