The year 2024 represents a critical juncture in the pragmatic approach to climate finance. One of the keys to achieving this is to scale proven technologies using financing approaches that have been proven to work. According to Faheen Allibhoy, Managing Director & Global Head of Multilateral Institutions & Development Banks at J.P. Morgan, and Veronica Chau, Partner & Director, Sustainable Investing & Social Impact at Boston Consulting Group, speed, scale and pragmatism will be essential in achieving ambitious climate finance goals in 2024.
During 2021-2022, investments worth $1.3 trillion were allocated to climate-related projects. However, in order to meet the 1.5°C limit of warming outlined in the Paris Agreement, this level of investment will need to increase by a factor of five. Therefore, 2024 will be another pivotal year for climate action. Despite progress made on emissions reductions and the financing required to facilitate them, the goals remain off track.
To mobilize the financing needed, three key areas must be prioritised: pragmatism, speed and scale. The top 10 emitting countries in the world account for two-thirds of global emissions, including China, the US, and India, while all of Africa produces only 4% of global emissions. Developed economies such as the US, Japan, Korea, and Germany have well-developed capital markets and have established sustainable climate finance architectures. However, countries like Canada and Saudi Arabia still have high emissions and offer the critical need to further implement incentives for improving energy efficiency.
Furthermore, reform of multilateral development banks is crucial in mobilizing climate financing for Emerging Markets and Developing Economies (EMDEs). By adopting a pragmatic approach that focuses on the climate transition of the highest emitting nations, significant progress can be made quickly.
Ramping up the scale with existing technologies is another crucial aspect. Implementing proven renewable energy technologies, net-zero building designs, clean manufacturing processes, and the adoption of electric vehicles are essential steps that need to be operationalized in 2024. Additionally, increasing the speed to achieve ambitious targets is equally vital. Recognizing that cleaner technology in one part of a value chain will require collaboration with actors up and down the entire chain is critical.
The private sector must step up by financing bankable projects that utilize mature technologies at scale, while governments need to deploy necessary incentives, rules, and policies to motivate climate action. Multilateral Development Banks also have a critical role to play in assisting EMDE countries with their energy plans, especially in terms of energy transmission and distribution.
Ultimately, the urgency of climate action cannot be overstated. We must act swiftly and decisively to combat the growing threat of climate change. While long-term goals are essential, we must prioritize short-term actions that are effective and scalable. The views expressed in this article are those of the author alone and not the World Economic Forum.
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