Friday, December 3

Private equity wants to participate in the green transition with billions in the stock market

At the center of the stage at COP26, Wednesday was the Glasgow Financial Alliance for Net Zero (GFANZ), a gigantic collection of private financial organizations that aims to make trillions of dollars available for a global transition to net zero greenhouse gas emissions.

The alliance was launched earlier this year by Canadian Mark Carney, former head of the Bank of Canada and the Bank of England and current UN special envoy for climate action and finance.

It includes 450 companies, from 45 countries, representing assets worth more than $ 130 trillion. The group includes banks, asset managers, insurers, and other financial organizations. From the end of October, Royal Bank of Canada, Bank of Montreal, Toronto-Dominion Bank, Canadian Imperial Bank of Commerce, Scotiabank and the National Bank of Canada have signed. Vancity signed on when the alliance first launched in April.

In essence, the stated goal of the alliance is to align capital with a net world zero, or as Carney describes it, the new “plumbing” for the global financial system to guarantee the flow of green investments.

“Until today there was not enough money in the world to finance the transition, [and] this is a milestone, ”Carney said during a panel discussion on Monday, flanked by World Bank President David Malpass, International Monetary Fund Managing Director Kristalina Georgieva, and Kenyan Treasury Secretary Ukur Yatani.

Looking for projects to finance

“The money is here, but that money needs net zero-aligned projects,” Carney said, adding that he wants that to become a focus of the G20 in the next year.

Calculating the cost of a global transition to net zero greenhouse gas emissions by 2050 is difficult. But BloombergNEF’s New Energy Perspective, said the cost is likely to be in the range of $ 92 trillion to $ 173 trillion. Other Dear set the cost at around $ 4 trillion per year, which works out to roughly $ 120 trillion from 2020 to 2050.

In a net zero world, any greenhouse gas added to the atmosphere would be offset by removing the same amount of gases that cause climate change, including carbon dioxide.

Carney spoke about the need for “blended finance,” which would use public dollars to drive more investment from the private sector. For the private sector, returns can be huge.

An international group of banks called the Glasgow Financial Alliance for Net Zero (GFANZ) says it has assets of $ 130 trillion to support a global transition to net zero greenhouse gas emissions. Critics are skeptical. # COP26 # COP26xCNO

“Blended finance, as Mark Carney and others talked about this morning, is about the cash merger of the multilateral development banks, [International Monetary Fund, World Bank] national development banks and private finance to support projects, ”explained Richard Brooks, director of climate finance at

“It can lead to public funds supporting private profits.”

Brooks called the GFANZ ad closer to “smoke and mirrors” than actual climate action, because it didn’t mention fossil fuels.

“Many of these banks, pension funds and insurers are part of the problem and are reluctant, based on the new agreements they signed with fossil fuel companies, to change their ways and become part of the solution,” he said.

Banks continue to invest in fossil fuels

For example, a report by the Amsterdam-based research firm Profundo found that the five big Canadian banks (RBC, BMO, TD, CIBC, and Scotiabank) gave fossil fuel companies nearly $ 700 billion in loans from that the Paris Agreement was signed and they invested $ 125 billion directly in them.

“I would rather see $ 50 trillion mobilized to phase out funding for coal, oil and gas starting in 2021 than a much larger number with weaker commitments to address the elephant in the room,” Brooks said.

Climate Action Network Canada’s international climate diplomacy manager Eddy Pérez said National Observer of Canada Since GFANZ does not necessarily represent the financial system in general, and without rules to prevent members from financing fossil fuel projects, the alliance is limited in how effective it could be in addressing climate change.

“What needs to be assessed is how this commitment will help achieve emissions cuts in this decade,” he said.

Solar panels on the roof of a house. An international alliance of bankers now says it is looking for green investments to finance. Photo by KM L / Pixels

The goal “is not about net-zero [by 2050], it’s actually around 1.5 C and the integrity to do it as soon as possible, ”he added, acknowledging that without immediate and abrupt emission reductions, the Paris Agreement goal of keeping global warming at 1.5 C will be out. of scope.

For Canada, which has committed $ 5.3 billion over five years in international climate finance, Environment and Climate Change spokesperson Samantha Bayard said the government believes public funding will not be enough to address the scale of the problem.

Canada wants private sector involvement

“The private sector plays a key role in achieving the levels of investment required to shift the world towards a low-carbon, climate-resilient path,” he said.

“That is why a key priority of Canada’s climate finance support is to mobilize private sector investors to drive the kinds of investments Canada needs to achieve the Paris commitments. In doing so, Canada is taking an innovative approach of partnering with multilateral development banks (MDBs) to leverage private sector financing by removing barriers to private investment in developing countries. “

NDP leader Jagmeet Singh said he is “deeply concerned” by climate finance strategies that introduce a private sector profit motive into the alleged solution.

“Whenever you have a profit motive, the priorities are not ‘Is it as accessible as possible? Do you provide the best access to as many people as possible? It’s universal? The objective is does it make me earn money? Is it a return on my investment? ” he said.

Singh pointed to the Infrastructure Bank of Canada established in 2017, mandated to invest billions in infrastructure to attract private capital. The problem with these types of public-private partnerships is that they are essentially public subsidies for private profit, that end up costing the public moreSingh said.

Public funding is a better option, says NDP’s Singh

“The projects financed with public funds are much higher, the benefits flow to the people and we are not only diverting public resources into private pockets, which is what these agreements do,” he said.

“How is it [GFANZ] a good ad? You’re going to have trillions of dollars of private money that will go to the public infrastructure that people need. “

Singh used public transport infrastructure as an example, saying that if the goal is to fight the climate crisis, “We want as many people as possible to use public transport.”

Wind generators.
Wind-generated electricity could be boosted by increased funding for low-emission projects. Photo by Kervin Edward Lara / Pexels

“If public transport is privatized, the goal of private entities is to make the most money from it, not to make sure that as many people as possible use it,” Singh said. “That is the wrong reason, the reason should be that more people use it to reduce dependence on cars and we reduce our emissions.”

In a recent interview with Planet B: everything must change, former Greek finance minister and one of the founding members of International progressiveYanis Varoufakis said that the way to achieve a transition to a climate-safe future is with a new global green deal inspired by the New Deal implemented in the US during the Great Depression.

He said that while many progressives want to tax the rich to pay for a green transition, there is not enough time to raise enough tax money to tackle climate collapse.

“If we hope to finance the transition by taxing the rich, we will kill the planet,” he said. “We need $ 10 trillion a year, starting now globally, to finance the green transition. $ 10 trillion a year that you will never get in taxes.

“That is why I think Roosevelt [NewDeal] the idea is so important. We need to use public financial instruments to mobilize existing resources, existing liquidity, existing money immediately, ”said Varoufakis.

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