Guest view: A platform for climate collaboration

OTTAWA, July 14 (Reuters Breakingviews) - Surging inflation, ruptures in global energy and food markets, and stagnating growth.

These are the tough challenges facing finance ministers and central bank governors from the G20 group of nations as they gather this week in Bali.

These tests are compounded by the deepening climate crisis, whose costs, absent decisive action, will dwarf these current hardships.

Now is the time for the G20 to prove its worth through bold collective action that turns crisis into opportunity. Action that accelerates the transition from our current energy system, which has once again proven unreliable, unaffordable, inaccessible and unsustainable. Action that catalyzes enormous private investment to accelerate growth and create high paying jobs across the G20. Action that supports a just transition in emerging and developing countries that have done the least to cause the climate crisis, but which will bear its brunt.

Delivering orderly transitions of energy systems away from coal and to renewable sources in ways that protect the most vulnerable will require a sevenfold increase in investment. That’s equivalent to an additional $1 trillion per year by the end of the decade across emerging markets and developing countries. The private sector can provide most of this financing, multiplying the impact of public funds, provided the G20 has the courage to act.

The G20 can build on the foundation of a private financial system that is being reshaped for the net-zero transition. Last year’s COP26 summit agreed major reforms to bring climate change to the heart of financial decisions. Now the Glasgow Financial Alliance for Net Zero (GFANZ) is developing the tools for financial institutions to align their balance sheets with the transition, including the new Net-zero Transition Plan framework. These will help deliver the financing for companies and countries with credible plans to reduce emissions and improve the environment.

Unlocking private capital at scale and speed requires unprecedented collaboration between the private and public sectors. The G20’s Country Platforms – government-led collaborative bodies – could provide the right framework. They can concentrate and leverage public and donor finance to “crowd in” private investment in support of developing economies’ transition to new energy systems that deliver affordable power, good jobs and low carbon emissions. The G20 must accelerate the process of building effective Country Platforms in countries they have committed to, including Indonesia, South Africa and Vietnam. To that end, GFANZ, which has over 500 financial institutions committed to net zero, has today outlined the features that will be crucial to success.

First, Country Platforms must be founded on ambitious, country-led, net zero-aligned transition plans with clear objectives and milestones. Each country seeking finance must lay out the significant reductions in carbon emissions it intends to deliver. It must also show how it will ensure a just transition for workers and communities, with a clear timetable and specific projects.

Second, Country Platforms should be underpinned by publicly accessible financing roadmaps that identify transition costs and investment needs, potential financing sources of capital and their most effective use. Providers must ensure scarce public and philanthropic capital is deployed where they are most needed, not where they could crowd out private investment. As G7 leaders recognized at their recent summit, this requires a revolution in the way the public and private sectors collaborate. Concessional capital must be pooled and leveraged effectively to de-risk projects and attract large multiples of private finance. To support this, high integrity carbon credit markets can be integrated into Country Platforms to mobilize additional capital to protect natural carbon sinks in emerging markets and developing economies, such as rainforests and mangroves.

Third, it’s critical that there is an agreed and credible process for labeling all projects under a Platform as being aligned with net zero. This requires enhanced project preparation and supportive regulatory environments. Public finance can play an important role supporting the preparation of projects and building in-country capacity that will catalyze private finance. GFANZ members are ready and able to support these efforts, including by working with local financial institutions to help them originate, structure and deliver bankable, net zero-aligned projects.

The G20 must drive a comprehensive response to the growing tragedies of the global energy and food crises. Despite the challenges, addressing climate change can provide platforms for collaboration. By turning Country Platforms from concepts to realities, the G20 can turn looming disaster into launchpads for strong, sustainable and balanced growth across its membership.

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(The author is a Reuters Breakingviews guest columnist. The opinions expressed are his own.)

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Mark Carney is co-chair of the Glasgow Financial Alliance for Net Zero (GFANZ) and the United Nations Special Envoy for Climate Action and Finance.

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