COP28, beginning this week in Dubai, marks the first global stocktake to assess the progress of the Paris Agreement objectives to limit the global temperature rise to 1.5°C above pre-industrial levels. The message is clear: to address climate change effectively, we need finance directed towards greener strategies — and although financial institutions are adopting more sustainable practices, the crucial question remains: is this shift making a difference, or is the finance industry still not allocating enough funds to tackle urgent challenges?
The concept of climate finance, gaining momentum in recent years, refers to the mobilisation of funds to support initiatives aimed at mitigating and adapting to the effects of climate change. Governments, international organisations, and the private sector are key players in this effort, pooling resources to reduce greenhouse gas emissions, enhance resilience to climate impacts, and promote sustainable development.
In the midst of a rapidly escalating global climate crisis, the role of finance in facilitating a greener future and fostering sustainable development has been highlighted in international discussions. The linchpin of these dialogues is the United Nations Climate Change Conferences, specifically the annual Conference of the Parties (COP) meetings, serving as forums for the regular assessment of progress in our efforts to address and mitigate the impacts of climate change.
Unlocking climate finance: the role of COP meetings
COP28 is an opportunity to recalibrate the trajectory of our progress in the fight against climate change. This involves addressing all the impacts of human activities, including carbon emissions, deforestation, and unsustainable practices, all of which contribute to climate change. An immediate and concerted shift toward sustainable and environmentally conscious practices is not just a nicety; it is a necessity. This urgency cannot be overstated. Scientists, such as Johan Rockström, emphasise the need for a significant acceleration in the pace of change.
Climate change impacts have cascading consequences, extending to food security and the displacement of millions — Gernot Laganda from the World Food Programme has highlighted that 42 million people are on the brink of hunger due to climate-related events.
Anticipating impact and the role of the private sector
Despite increased talk about green energy, sustainability, and climate change globally, in 2022 emissions hit a new high, indicating a lack of substantial global action. According to the IMF, global fossil fuel subsidies rose by $2 trillion between 2020 and 2022 due to governmental support of energy prices and continued investments. This data highlights a disparity between discussions and concrete efforts to reduce the environmental impact of fossil fuels.
The private sector is a key player in financing climate action, and initiatives such as the Glasgow Financial Alliance for Net Zero have been attempting to rally financial institutions around a common goal of achieving net-zero emissions by 2050. This collaboration creates “significant momentum” in channelling private capital into environmentally sustainable projects, but how much of a difference does this really make?
While financial institutions are asserting a commitment to channelling their funds into renewable energy projects like solar, wind, and hydropower, recent data suggests a different reality. Between 2016 and 2022, 7% of global banks’ energy financing was directed towards renewables. Instead of supporting the transition to a low-carbon economy and diminishing reliance on fossil fuels, do these numbers indicate that major financial institutions are falling short of their role in advancing and meeting climate targets?
As the urgency of climate action intensifies, it is no longer sufficient enough to merely discuss change; actual decisive action is needed to meet these ambitious targets and address the profound challenges posed by climate change.
The role of sustainable finance
Mark Carney, the former Governor of the Bank of England, has previously warned that firms neglecting the climate crisis risk bankruptcy. Value-based financial institutions, which place strong emphasis on ethics, social responsibility and environmental considerations, are in a position to make a significant impact and to take the lead — by committing to avoid support for environmentally harmful projects and industries, while actively funding sustainable initiatives and mitigation strategies.
Innovative strategies and a commitment to ethical, sustainable, and resilient financial practices is crucial, if financial institutions are to meaningfully help shape a sustainable future. Actions speak louder than words.
We all have a role to play. Here at Science Card we’re working to promote and drive funding for innovative scientific research projects addressing climate change, advancing healthcare, and driving computational research. It’s our way of enabling our customers to shape the future they desire, for the greater good of us all.
