LONDON — The U.K. government launched its COP26 private finance agenda Thursday but the plan was immediately criticized for a “bias” toward the global north.
The overarching goal of the agenda is to ensure that all private finance decisions made across the private sector consider climate change. It focuses on how climate risk reporting and management will help drive the transition to a net-zero carbon economy.
But climate finance experts said more work needed to be done to ensure the agenda was truly holistic and inclusive.
“We need the COP26 president to appoint a champion who understands adaptation, the challenges of developing countries.”— Clare Shakya, director of climate change, International Institute for Environment and Development
The announcement was made in London’s Guildhall by Alok Sharma, the U.K.’s CO26 president, and Mark Carney, outgoing governor of the Bank of England and special adviser on climate finance to Prime Minister Boris Johnson.
The U.K. launched its hosting of the U.N. climate conference in a state of disarray.
“Given the scale of the climate challenge and the rising expectations of our citizens, 2020 must be a year of climate action where everybody’s in — and that includes the world’s leading financial center,” Carney said.
“To identify the largest opportunities and to manage the associated risks, disclosures of climate risk must become comprehensive, climate risk management must be transformed, and investing for a net-zero world must go mainstream.”
“Achieving net-zero emissions will require a whole economy transition — every company, every bank, every insurer, and investor will have to adjust their business models,” he added. “This could turn an existential risk into the greatest commercial opportunity of our time.”
Sharma, who previously led the U.K. Department for International Development, said five areas would be the focus of “particular attention” at this year’s COP26, including adaptation and resilience; safeguarding nature and reducing carbon emissions; energy transition; and clean road transport.
“The fifth, to make this all possible, [is] unleashing the finance which will power the shift to a zero-carbon economy,” Sharma said. “From solar panels to electric vehicles and tree planting, it is often finance that turns good intentions into action.”
But Clare Shakya, director of climate change at the International Institute for Environment and Development, said: “It's a great package for the richest countries but it needs to be holistic to reach the poorer countries.”
She said the heightened focus on the climate crisis meant there were “unintended consequences” of reducing investment in low-income countries.
“For the poorest countries that are already struggling to attract private investment, increasing visibility [of climate risk] just means they will be even less interesting to invest in and they will struggle more to attract the private investment flows,” she told Devex.
“We want private investors to incentivize rapid transition [to green economies] ... but the tools set out [on Thursday] won’t work in countries or regions that fail to attract investment already … Pushing for tightening private investment practice needs to be alongside a commitment to help the poorest countries reduce their vulnerability to climate change and build the governance and institutions that manage their risks ... This takes significant public investment,” she added.
Kate Levick, program leader for finance at E3G, an environmental think tank, echoed this sentiment. “Despite the messaging around ‘unleashing economic opportunity,’ there is a lot of focus on the risk side and on what we want to manage and avoid rather than on the future green economy that we need to finance,” she said.
Levick continued: “I’m not yet seeing the strong vision coming through for what is the green, transformative future we really want to build. We need that to really energize the markets and create transformations, including the development finance institutions and multilateral development banks.”
Shakya added that the experience of both Carney and Nigel Topping, appointed by the U.K. government as a COP26 “champion” to work with the private sector on climate action, was “very northern and they won’t be able to see the gaps in what they are offering.”
“We need the COP26 president to appoint a champion who understands adaptation, the challenges of developing countries, and we need to see much more attention to a package that is holistic but includes types of support and nature of support that developing countries need,” Shakya said.
While the announcement was focused on the private sector, Shakya also stressed the importance of public finance to lower-income countries, which she said required an equivalent framework.
During his speech, Sharma also placed a strong emphasis on development finance institutions and multilateral development banks, saying MDBs “are the largest vehicle for channeling climate finance to developing countries.”
Levick said she welcomed the approach to expand financing through multilaterals but said “more unpacking” was needed for a blended finance approach.
“We want to see very strong ambition in that area. For example, a group of governments to increase MDB/DFI capitalization by a significant amount. It would be good to have more specifics of that kind,” she said.