Do we Have the Capital to Fuel the Sustainable Transformation? Implementing the Paris Agreement Would Cost $23 trillion, Estimated by the World Bank

Posted by: YijunW

Do we have a global consensus to mitigate climate change? Yes.
Have we as a global community agreed on common goals regarding sustainability? Yes.
Do we have the money to fuel the sustainable transition? Well, it is a long story.

The total cost to achieve the goal of a 2-degree Celsius temperature rise, which is included in the Sustainable Development Goals’ 17 set of outcomes, is a groundbreaking and brave target. The International Finance Corporation, which belongs to the World Bank, estimates that implementing the Paris Agreement would require approximately $23 trillion in capital investments before 2030. The United Nations found that it would cost $6 trillion annually for 15 years to achieve the Sustainable Development Goals.

The International Monetary Fund estimates that it cost the global economy $78 billion to follow these terms in 2016 alone. Where will these funds come from in the future?

Some positive news is that leading finance organizations such as Barclays, Citi, Goldman Sachs, HSBC and JPMorgan Chase see unlimited opportunity to fund the transition, along with the world’s governments, multinational development banks, pension funds and others. Some of this green finance is merely a natural extension of businesses as usual. Banks have long loaned funds for building construction, so backing green buildings is just the same business, just buildings in a different color. Funding power plants such as solar or a wind farms is a normal and expected practice (GreenBiz).

GreenBiz's report "State of Green Business Report 2018" presents ten top sustainability trends and one of the ten trends is green finance funds the sustainability transition. According to the report, green bonds, introduced by the European Investment Bank a decade ago, are one of the most famous green finance instrument and likely the one with the fastest growth. Examples of projects financed by green bonds are renewable energy, pollution prevention, and resource conservation. In 2013, International Finance Corporation issued $1 billion in green bonds and it is sold within an hour. In that year, the green bonds market was only $11 billion. In 2017, it accelerated to $200 billion. The 2017 Organization for Economic Co-operation and Development report estimates that the green bond market could continue to grow to $4.7 trillion to $5.6 trillion in outstanding bonds by 2035, with issuances of $620 billion to $720 billion per year.

It is still going. It is really a global show to watch. Here are some of the big organizations to watch:

• The London non-government organizations aim to offer the $100 trillion bond market for climate change solutions and have created the de facto standard* for green bonds.

• G20 Green Finance Study Group, which is a research and policy group of large-economy heads committed to green finance and has stepped out a number of steps to develop and propagate related policy measures. JPMorgan Chase, Bank of America, Citi and HSBC have made significant funding commitments to funding sustainable technologies. Last year, they committed to green-finance $200 billion by 2020.

• State Bank of India, which is the oldest commercial bank in the Indian subcontinent, announced in 2017 that it would raise $3 billion through green bonds.

• The World Bank has taken a leadership role in Green Finance. It offers beyond $10 billion a year for programs that increase resilience to climate change.

It is clearly a big show. Are you ready to be part of it? See you later, I am ready to buy some green bonds index.

* The de facto standard is a convention that has achieved a dominant position by public acceptance or market forces. For instance, an early entrance into the market.

To read more, please visit:
https://www.greenbiz.com/report/state-green-business-report-2018