TRADE & FINANCE 27
But investors recognize that this is not only about
risk management and likely value erosion. There are
widespread opportunities associated with low carbon
and climate resilient growth, many of which are clearly
profitable, particularly in sectors focused on resource
management, energy efficiency, green infrastructure
and buildings. And solving the energy conundrum is at
the core of sustainable growth, particularly in emerging
markets. In Asia alone, a massive investment of US$3.6tn
is needed to equip the region with the power capacity
needed by 2030. Two thirds of that sum will be spent on
renewable generation technologies such as wind, solar
and hydro-electric . The market potential is huge and
obvious.
Significant investment is required to finance the low
carbon transition
Despite the rationale behind why climate investment
makes sense, much more is needed: a significant shift
in investment patterns and a scale-up in investment
volume are required to meet climate and energy goals.
These goals can only be achieved if governments create
conducive investment environments through appropriate
incentives and mechanisms to facilitate private sector
engagement and capital flows.
Policy makers must support the transition
Policy emphasis should be placed on supporting the
development and deployment of renewable energy and
energy efficiency technologies in parallel with measures
to reduce fossil fuel dependencies. Redirecting subsidies
and adopting other mechanisms, such as fiscal measures,
that support the adoption of climate friendly technologies
are to be encouraged. Carbon pricing is also crucial to
addressing climate change. The longer governments do
not take action on tackling this market failure, the longer
institutional investors will be unable to accurately price in
the risks.
Similarly, disincentives are needed to avoid, reduce and
manage polluting industries and land use conversion –
particularly of tropical peat land forest. Care needs to be
taken to ensure that climate resilient infrastructure and
large-scale renewable energy projects are developed
with appropriate environmental and social safeguards in
place, these ideally being considered during strategic land
use planning to ensure that any anticipated significant
adverse impacts on sensitive receivers, including existing
community users, can either be avoided or satisfactorily
addressed well in advance of any physical development.
Investing sustainably is going mainstream in part because
there is a growing awareness of the massive risks of
not doing so. Examples such as major pension and
endowment funds divesting out of fossil fuel companies
and of the soaring demand for environmental, social and
governance (ESG) funds are evidence of this.
But strong policy is needed to create a basis for investors
to seek out opportunities that have a production and
consumption profile more aligned with low carbon, low
pollution, and resource efficient growth. Against the
backdrop of international climate negotiations, investors
can and will play their part in building a sustainable future.
But so too must governments. Q