2023-04-23 14:54:54
In 28 years of discussions on the climate (since Berlin in 1995) and a little more on biodiversity (since Nassau in 1994), the least that can be said is that progress on the financial side seems slow, very slow. The sector hiccups a bit, greening here and there a few assets, but the trend is not being reversed. Finance is still not at the rendezvous of its century.
Scientific doubt no longer exists on the fact that climate change and the loss of nature are directly linked to the contemporary way of life and consumption. With unchanged technology, it is not possible for all of humanity to consume so many natural resources and emit so much CO2 than an average Westerner in 2023. It is also noted that the climate issue and that of biodiversity are “the great problem of collective action in the world”. No country will be able to resolve the issue on its own.
There is also a consensus that the social question, and more specifically equity, is decisive for the feasibility of public policies. Climate-friendly and nature-friendly solutions, when they must result in reductions in consumption, mobility or standard of living, are not socially accepted.
It has also been clearly identified that each country, like each individual, believes that its broadcasts are legitimate. It would be up to others to make efforts to limit their environmental footprint. The situation is reminiscent of Mancur Olson’s paradox, according to which a large group can remain paralyzed in its actions even if there is a consensus on the objectives and the means. Each individual imagines that he is only a small drop of water. His isolated individual action will bring him nothing, while engaging represents an immediate cost. It is therefore unlikely that things will evolve under the effect of simple goodwill.
Who should pay for what?
To frame the capacities of our planet, a symbolic choice was made by the States around two simple objectives, which are like mantras: to limit the rise in average temperatures to 1.5°C compared to pre-industrial levels and to protect 30% of the land and 30% of the seas. In the absence of a sobriety project, all the solutions go through the call for a massive program of “sustainable” investments. The latest conferences of the parties (COP) held in 2022 on the climate in Egypt and on biodiversity in Canada have also insisted on this point: the question of financing has become a central element of the international debate.
In December 2022, the richest countries pledged to double their support for developing countries to finance the protection of biodiversity, to reach 20 billion per year in 2025CC BY-SA
This is the subject of antagonisms. If we simplify a little, the “rich” countries have internalized a contemporary reality: they observe that the emerging countries, including China and India, are following the productivist and consumerist development model. The climate issue, like that of biodiversity, must therefore take on a universal character, and not be limited to their own backpedaling. This is what had made consensus in 2015 and which allowed the signing of the Paris agreement on the climate and that of New York on the Sustainable Development Goals (SDGs). Everyone is concerned, each country has its own transition path to invent.
The “poor” countries, grouped in the “G77 + China” coalition, do not reject the 2015 agreements. They do, however, want the high-income countries to accept a certain historical responsibility. Few emitters and already faced with a high debt, they are asking for additional financing, in donations or on favorable terms, to invest and adapt to the profound changes that are coming.
Large note or small change?
In Copenhagen, in 2009, the negotiators of the COPs for the financial aspect, obtained the commitment of the richest countries to mobilize for the poorest countries each year 100 billion public and private dollars for the Climate from 2020 , a promise that should finally be honored this year.
The objective was, in any case, reaffirmed at COP 27 which was held in November 2022 in Sharm el-Sheikh in Egypt. In Montreal, last December, 20 billion were promised for biodiversity from 2025, 30 from 2030. These amounts would be added to those of Public Development Assistance (ODA) which is fixed at 204 billion in 2022.
These numbers may seem high. Nevertheless, according to economists from the International Energy Agency or the Black Rock Investment Institute, it would take a trillion dollars of investment per year in renewables in emerging markets alone, excluding China, compared to around 150 billion currently invested. . We can also cite the estimates of the OECD at 6,900 billion dollars annually for infrastructure, those of the International Monetary Fund which reach between 3,000 and 6,000 billion USD per year or more recently that of a group of independent experts commissioned by the Presidency of COP27, which also concludes around the figure of one trillion per year.
On the side of financial institutions, the total assets held represent approximately 500,000 billion dollars. That of households, which is a subset, including bank deposits and investments, stands in 2021 at approximately 35,000 billion for only European countries. These figures are stocks, and it is their conversion into objects of consumption or into new investments that transform them into flows.
To change our relationship with nature, what would be the priority? Concentrate on 120 billion for the benefit of the poorest countries, and a trillion in renewables, or apply to redirect 500,000 billion of assets towards sustainable objects, including the fight against poverty? If 2% of global assets were to become sustainable each year, 10 trillion would be moving in the right direction, or twenty times more. Can ambition be limited to financing a few additional wind turbines, or should it include all financial flows towards sustainability?
Additional tools
Two complementary public policies seem in fact to be promoted to meet this ambition.
The first remains that of international solidarity. It calls for the addition to Official Development Assistance of the 120 billion dollars a year mentioned above (100 for the climate and 20 for biodiversity), which the less advanced countries are claiming in order to become actors in their adaptation and their transition. Even if the amounts remain proportionally very marginal compared to global financial assets, this probably remains a necessary condition for a renewed and inclusive global dialogue.
The second concerns all actors, public and private, in all countries. It calls for an overhaul of financial standards in order to redirect flows, all flows, towards uses and investments that pass sustainability tests. This is the whole spirit of the European green taxonomy, the strengthening of extra-financial standards promoted by the Advisory Group on Financial Information (EFRAG) or the network of Central Banks for the greening of finance.
As I point out in my illustrated educational book Financing our common future, perhaps this is how the rainbow of Sustainable Development Goals will take on its true meaning. SDG17 on “partnership” calls for a coalition of all actors.
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