Scoring success in green finance
CLIMATE change may have become a political football. But for Stephen Nolan, who heads the UN’s financial centres for sustainability network, it is a deadly serious issue that the global finance industry can help fight. ‘I have my nine-year-old talking about it to me now. My God, what does that say about us as adults?
‘That kids are now saying: “You’ve let us down and we’re more connected nowadays to what is happening. We as children are realising that you’re letting us down and this isn’t just us bunking off school for a day. We’re coming out because we have a cause. We’re committed to that cause and we want to make our voice heard”.’
Describing climate change as a global humanitarian problem, Mr Nolan said ‘hardcore’ evidence was backed up by distinguished people.
‘You look at some of the humanitarian disasters that we’re now seeing around the world. They’re being brought about by climate change.’
A market solution, supported by policy makers developing a suitable framework, could make a critical difference – with FC4S members like Guernsey, London, New York, Tokyo and Beijing being able to play a positive role.
‘Philanthropy won’t meet this. Corporate social responsibility won’t meet this. And governments on their own cannot meet this challenge themselves,’ said Mr Nolan during a recent visit to Guernsey.
‘The amount of capital required is so vast that if you didn’t create it in a model that people could actually make a return on investment, well then we won’t be able to meet the challenge. So how can you create a framework where everybody has a role to play?
‘Not even China on its own as a government can pay for its financing needs to de-carbonise. That’s China. So, the sums are so big. I think what you are seeing with new regulations, they have to nudge in a positive way to encourage capital markets to invest more.’
Estimates of the amounts needed are massive. Figures like $90 trillion have been set out by the G20 group of nations, while there could be a £750m. cost for Guernsey alone in the coming years.
‘The pitch is now being marked out. We’ve seen regulators, supervisors and all these other players that are now beginning to put the rules and regulations around this agenda,’ said Mr Nolan. ‘Therefore as a market actor you know the investment opportunity is X: “So how do I actually create that vehicle or product or service through which to invest in X and get a return?”’
With capital markets, regulators, policy makers and companies now ‘sitting up’ when it came to climate change, positive action was possible. ‘I’m always going to say there’s never been a time in the history of mankind where we have had as much capital floating around. The ingenuity around technology and innovation is phenomenal. So what we are now seeing is we have the opportunity to solve this.
‘I think we have actually reached a tipping point where various serious people are getting around tables saying: “What can we do collectively?” There are massive risks in this but there are also significant opportunities – and I think that’s what people are really beginning to see.
‘So the hundreds of millions that have been invested in date primarily in renewables, solar, wind, have got the returns. We know we need to scale it dramatically and it has to go across all economies. And that’s where we’re now tipping into the next part.’
Mr Nolan went on: ‘We know what the challenge is. We know what the timeframe is. We do have all the resources. So for me, it’s more about the urgency of putting all those resources into a common approach and then obviously how do you localise that on an individual nation state level, city level or whatever.’
Guernsey has already established a green finance initiative and is developing new products and services that have received global attention – and Mr Nolan suggested the island could be at the vanguard of the growing sector. ‘We are at hundreds of billions. We need to go to trillions. The European Commission, other jurisdictions, the regulators and so on, are developing the policy and regulatory framework to allow us to get to those trillions.
‘It’s still going to take another two or three years. So those jurisdictions that are now developing strategic plans, putting resources behind said plans, getting their wins on the board are going to be well positioned to ride that wave over the next two, three years.’
It was now up to Guernsey to ‘leverage’ off those wins on the board, added Mr Nolan.
