Finance — last exit before the climate highway to hell
What we need to see on Finance Day at COP27 — Margaret Kuhlow, Global Finance Practice Leader, WWF
If quickly and smartly scaled, public and private investment in adaptation and nature-based solutions offer an off-ramp from the highway to climate hell and can drive equitable, net-zero and nature-positive outcomes.
So, what do we need from Finance Day at COP27?
Scaling investment in nature
Governments must prioritize investment in nature, incorporate nature in transition and adaptation plans, and commit to shaping a nature-positive global economy.
Nature loss and ecosystem degradation radically restrict opportunities to tackle climate change. We cannot limit global heating to 1.5°C without investment in nature and nature-based solutions to climate breakdown.
Building on commitments made last year in Glasgow, early announcements at COP27 include major new public and private sector financing pledges for forests including an additional €1 billion of public finance and $3.6 billion in private capital to halt and reverse forest loss and land degradation.
This is good news — but we need much, much more.
Current investments in nature-based solutions amount to $133 billion — most of which comes from public sources. To meet climate change, nature, and land degradation targets, we need to close a $4.1 trillion financing gap in nature by 2050.
Many financial institutions and companies are already responding but leaders at COP27 must prioritize investment in nature. This means:
- including nature risk in financial regulation
- implementing the policy recommendations of the Coalition of Finance Ministers for Climate Action to reduce nature-related risks
- incorporating nature in transition and adaptation plans and NDCs
- endorsing the UK’s new 10 Point Plan for financing biodiversity
- acting as cornerstone investors that unlock additional private investment in nature-based solutions which support a just transition.
Globally, transitioning to a nature-positive economy could generate annual business opportunities worth over $10 trillion and create 395 million jobs by 2030. And we invite interested governments to collaborate with WWF and partners in establishing a roadmap for a nature-positive economy.
Making credible net-zero commitments and transition plans
At COP27, governments, companies and financial institutions must rapidly accelerate the Race to Zero by making ambitious, credible net-zero commitments, and drawing up credible transition plans.
Please join WWF and special guests at COP27 on Finance Day at 09.30 GMT+2 — either in person or virtually — to explore what credible transition plans look like.
Despite diluting adherence to Race to Zero requirements optional for its members — in particular around investment in fossil fuels — the Glasgow Financial Alliance for Net Zero (GFANZ) still promises a step change in transition and encourages governments to engage in economic and financial system reform.
This requires a host of public policy measures, including economy-wide net zero targets, regulatory reform, fossil fuel subsidy phase out, carbon pricing, and mandatory climate reporting.
Transition plans are particularly vital in allowing financial institutions and companies to set out clear, actionable steps that deliver on climate and nature targets. Being adopted by a growing number of countries and companies, they should help unlock large-scale finance for the transition to net zero.
Given climate-smart growth could deliver at least $26 trillion in economic benefits cumulatively through to 2030 compared with business as usual, there’s really no excuse not to join the Race to Zero.
Delivering on promises and building trust
At a minimum, developed countries must meet the annual $100 billion public climate finance commitment made in Copenhagen in 2010 and double financing for adaptation. In addition, they should agree a new post-2025 finance goal and establish a new finance facility for dealing with loss and damage.
Climate finance still falls far short of what’s needed to keep global warming within 1.5°C. Delivering on the $100 billion — a little over a month’s worth of the oil and gas sector’s average profits over the past 50 years — is the minimum outcome required at COP27.
It is critical not just for funding transition in low income countries but for establishing trust and good will, without which there is little incentive for countries such as Brazil, India, and Indonesia — the big greenhouse gas emitters of the future — to take ambitious climate action.
It will also help trigger the scale of private investment required to secure a 1.5°C future, with critical grant capital and development finance to crowd in private investors who are increasingly looking to finance the transition.
Despite global economic gloom, it’s also critical that governments find a way in the medium term to unlock the $2 trillion a year in climate funding by 2030 that low income countries need to transition to net zero and deal with the effects of climate breakdown.
This means negotiating a new post-2025 goal for public climate finance and driving wider financial system reform that catalyzes more private finance for emerging and developing economies. This includes reshaping the World Bank and Multilateral Development Banks so that they are able to meet shared global challenges.
How far world leaders in Sharm El-Sheikh progress on climate finance will again be a touchstone determining whether COP is a success for people and the planet, especially the most vulnerable. They must use this time of jeopardy to build for the future and forge a new narrative of hope.
