| | | | | |  | | By Adam Behsudi | | | Welcome back to Global Insider’s Friday feature: The Conversation. Each week a POLITICO journalist shares an interview with a global thinker, politician, power player or personality. This week, Economics and Finance News Editor Adam Behsudi talks to a U.N. envoy leading efforts to mobilize the private sector in the fight against climate change. Follow Adam on Twitter | Send ideas and insights to abehsudi@politico.com
| | | | A message from the Atlantic Council Freedom and Prosperity Center: Join the Atlantic Council Freedom and Prosperity Center and official media partner Devex on July 6 for the launch of the 2023 Freedom and Prosperity Indexes – research demonstrating how economic, political, and legal freedoms is the surest path to durable prosperity. | | | | | | | 
Mark Carney peaks during a news conference at Bank Of England, March 11, 2020 in London. | Pool photo by Peter Summers. | The world’s problems seem to be getting worse and there’s not enough money to address them. Top among those is climate change — a key focus of more than 40 leaders, heads of international financial institutions and countless private sector and civil society representatives gathered in Paris this week. Debt among poorer countries ballooned as a result of the pandemic. Now, those countries, which often bear the brunt of climate change, are not only struggling to provide basic services but are being pushed further into debt as they deal with the financial fallout of fiercer storms, droughts, sea level rise and the ensuing social and political costs. The Summit for a New Global Financing Pact, which wraps up today, is meant to create a “new consensus” where other initiatives to boost climate funding for developing countries have failed or fizzled. I spoke with Mark Carney, a United Nations special envoy on climate and former central bank governor in the United Kingdom and Canada about how the world will pay for a clean energy transition and why the private sector is critical in that effort. Carney launched the Glasgow Financial Alliance for Net Zero — often referred to just as GFANZ, a global initiative of insurers, banks, asset manager and other financial institutions at the center of an effort to get the private sector to shift investment away from fossil fuels and reach a goal of net-zero emissions by 2050, a deadline scientists say is critical to hitting goals to limiting global temperature increases. The following interview has been condensed and edited for clarity. So what is the gap between how much financing is out there and what's actually necessary to help developing countries address climate change? I’m going to be generous and say that [current financing] is $100 billion a year. It's not, but I'm rounding it up. It needs to go to $1 trillion a year. It's a 10 times change that needs to happen over the course of the next several years. So we have a bit of time to build that up. And certainly by the end of the decade, it needs to be at that extra trillion a year. So it's quite a substantial funding gap. Now in the scale of global finance, at the scale of the global economy, it's not that big. It's a manageable funding gap. It can be achieved if we de-risk some of these investments.
| | | | LISTEN TO POLITICO'S ENERGY PODCAST: Check out our daily five-minute brief on the latest energy and environmental politics and policy news. Don't miss out on the must-know stories, candid insights, and analysis from POLITICO's energy team. Listen today. | | | | | What outcomes do you hope to see from this week’s summit? The first thing is to recognize the scale of the problem. I think that's been accomplished. Secondly, is to focus on how well scarce public money is being used to catalyze large scale private flows of financing. The fact of the matter has been that there's been very little crowding in of private financing with development dollars, if I would put it simply like that. Crucially, the focus is on transition planning of financial institutions, of companies, obviously, of countries as well. What's the private sector’s role here? The private sector is going to provide the bulk of this financing or it's not going to get financed. One trillion extra a year is a manageable amount of money for the private financial system. If I take GFANZ, the combined balance sheets of all the GFANZ members is $150 trillion. Finding a trillion dollars for the right investments in the emerging world is manageable. It is not a manageable amount of money for governments. The G-7 governments particularly have been struggling to get to a level of $100 billion in financing a year commitment that they had made more than 10 years ago at the Copenhagen [climate conference]. How do we use scarce public dollars most efficiently to unlock that private financing? The question is whether public money can provide a degree of “first loss” or forms of guarantees. The public sector also can help to develop standards for new markets (such as voluntary carbon credits). This doesn't really cost anything.
| | | | A message from the Atlantic Council Freedom and Prosperity Center:   | | | The U.S. is now funneling huge amounts of government support to climate initiatives through its Inflation Reduction Act. The European Union is pursuing similar measures. Are the investments being made in wealthier countries going to drive climate financing in developing countries? It’s a great question. They're not mutually exclusive. In fact, there are some pretty positive spillovers. I'll speak specifically to the inflation Reduction Act, but acknowledge that the dynamic in other countries, jurisdictions within the EU, in Canada, Korea, Japan, are looking to match as much of the Inflation Reduction Act as possible. I would almost say it's a quantum leap in climate policy in the support for accelerated climate transition in the developed economies. One of the things that happens with that, in a positive sense, is it will help drive down the costs of clean energy. Everyone will benefit from those spillovers. Does addressing climate change involve a lot of redistribution from wealthier countries to poorer countries? Is this a problem for politicians, for policymakers? There have been some very inefficient structures in the past. If you cast your line back 15-20 years and coming out of the Kyoto process, there was the prospect of country dollars [from wealthier nations] going to other countries to buy [clean development mechanism] carbon credits — no leverage, no catalytic impact from that. That was, in my view, a political problem. You fast forward to today, where what we're talking about is a much more efficient use of public money and public money that's pooled in international organizations getting five, seven, 10 times the amount of private money that flows as a consequence of that public money. I think that the judgment that voters and taxpayers should be making is how well is this development aid working to create change at speed.
| | | | SUBSCRIBE TO POWER SWITCH: The energy landscape is profoundly transforming. Power Switch is a daily newsletter that unlocks the most important stories driving the energy sector and the political forces shaping critical decisions about your energy future, from production to storage, distribution to consumption. Don’t miss out on Power Switch, your guide to the politics of energy transformation in America and around the world. SUBSCRIBE TODAY. | | | | | Are you worried about anti-ESG (environmental, social and governance) backlash that seems to be playing out in the U.S.? (A number major insurers left a subgroup of GFANZ in recent weeks after 23 Republican states attorney generals threatened legal action saying the companies’ collective net-zero commitments violated antitrust laws.) To be clear, it's largely a U.S. issue. Why we feel we’re on very strong territory is we're focused on the “E” in ESG. And we're focused on a specific component of the environment, which is the transition to net zero. So we're in a world where these are hard numbers. You can count emissions, you can see where they're going. There is real value creation for those companies that do get their emissions down. It is a fundamental driver of competitiveness of companies, and increasingly countries. There’s been some speculation that you want to enter Canadian politics. Is that in your trajectory? We spent half an hour talking about how to make an impact in and around arguably the most important global issue. And I'm fortunate to be part of GFANZ, to have this role with the U.N. and be involved in not just discussions but actual action. And yes, I care deeply about public policy issues, but while I can make a difference I’ll channel my efforts this way. Thanks to editor Heidi Vogt and producer Andrew Howard. SUBSCRIBE to the POLITICO newsletter family: D.C. Playbook | Brussels Playbook | London Playbook | Paris Playbook | Ottawa Playbook | EU Confidential | Digital Bridge | China Watcher | Berlin Bulletin | D.C. Influence | EU Influence | London Influence | Paris Influence
| | | | A message from the Atlantic Council Freedom and Prosperity Center: Join the Atlantic Council Freedom and Prosperity Center and official media partner Devex for the launch of the 2023 Freedom and Prosperity Indexes.
When: 9:30 and 10:30 am EST on July 6, 2023
Where: The Atlantic Council Headquarters in Washington, DC.
Who: Dan Negrea, Senior Director of the Freedom and Prosperity Center, and Joseph Lemoine, Deputy Director
What: a discussion of findings from the 2023 Freedom and Prosperity Indexes, covering 164 countries from 1995 to 2022. The data suggest that increased economic, political, and legal freedoms is the surest path to durable prosperity. The panelists will answer questions from the in-person and online audience.
Register for the event here. For more information about the 2023 Freedom and Prosperity Indexes, please watch our video overview. | | | | | | | Follow us | | | | |
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