April 13, 2024
World Economy

The global economy is getting greener. But is the transition happening fast enough?

The world needs to rapidly shift trillions of dollars into low-carbon investments to avoid a full-blown climate catastrophe, experts said Friday at the sixth session of the United Nations Environment Assembly (UNEA-6). 

“We are in a disastrous five-minutes-to-midnight situation,” said Sean Kidney, the CEO of the Climate Bonds Initiative, an advocacy group. “The extent of change we need to make is no longer gradual, it’s sudden. We have to jump off a cliff into a low-carbon world to have any kind of future for our children.” 

Kidney made the comments during a high-level discussion on how countries can align public and private finance to counter climate change, nature and biodiversity loss, and pollution and waste.  

The session was part of a larger focus at UNEA-6 on the global financial system. Delegates said how the world allocates some US$400 trillion in financial assets will determine whether humanity can tame climate change and end nature’s rapid decline. The discussions come amid mounting fears that the erosion of the natural world will torpedo economies across the globe. 

In a speech earlier this week, Inger Andersen, the Executive Director of the United Nations Environment Programme (UNEP), said US$7 trillion is invested every year in activities that harm nature.   

“Right now, humanity is financing its own failure,” said Andersen. “We must, instead, finance a better future by backing nature.” 

The process of shifting global financial flows has begun. More than US$4 trillion was invested in so-called green bonds as of October 2023, according to the Climate Bonds Initiative. That represents a 100-fold increase in the last decade. (Green bonds are financial instruments that raise money for planet-friendly projects.) 

Many developing countries, though, cannot afford to wait for the global financial system to change on its own, said Maria Susana Muhammad Gonzalez, Colombia’s Minister of Environment and Sustainable Development. 

“This crisis will not be solved with the law of the market,” she told delegates at UNEA-6. 

While many nations, like Colombia, want to invest in solutions to climate change and nature loss, they often do not have the financial resources when faced with high debt payments and the costs of climate change impacts. 

Gonzalez called for a new multilateral pact to reform the global financial system, allowing developing nations to access money for a transition to a greener future.  

“This is not debt forgiveness just for the sake of it,” said Gonzalez. “It is opening space for a new type of investment that opens a new cycle of productivity.” 

Last December at the UN Climate Change Conference countries for the first time agreed to transition away from fossil fuels. Even before that, investments in renewable energy were outstripping those in fossil fuels. That is a sign, said some, that an irreversible shift in the markets is underway. 

“From an investor perspective, it’s very simple,” said Kidney. “They tell me they believe the future has been decided. There is no doubt it will be green. The only question now for investors is the speed – and who will be a winner and who will be a loser.” 

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