How the fight against climate change can get real at COP26
- The meeting should not result in governments coming up with stricter – and largely meaningless – emission targets, but agreement on a joint public and private sector approach
- The entry of multilateral development banks into the climate change battle on a larger scale could bring organisation and resources into what is a largely uncoordinated exercise
What is critical to the meeting’s outcome is not that governments of advanced and developing economies should come up with stricter – and largely meaningless – emission targets but that they should agree to organise a joint approach between the public and private sectors.
Either that, Fink added, or they must “reinvent existing multilateral development banks” such as the World Bank. They must do this, he argued, because private and public financial institutions are not mobilising anywhere near enough money to get the job done in time.
It is not only developing nations – China and India especially – that need such intervention, however. The United States, Japan and Russia are also at the top of the big league of carbon dioxide emitters.
For this reversal, we should blame not only China but the uncoordinated rush by many nations to cut coal and nuclear power generation while relying on still-inadequate supplies of natural gas and alternative energy such as solar and wind power. Global energy shortages and soaring prices are the result.
The world is putting its faith in COP26, yet such gatherings are in reality a cop-out because they do not recognise the need for concerted action. Countries are no more capable of acting alone in the borderless world of climate change than companies.
Despite this, the COP process continues to rely on emission-cutting pledges by individual nations, while corporate action is confined to company-level sustainable investment.
Trillions of dollars have poured into ESG mutual and exchange-traded funds from investors eager to aid the climate fight – encouraged by fund managers who earn very tidy commissions on sales of such funds.
Almost anything labelled “green” – be it ESG, SDGs, impact investing, ethical investing or whatever – is eagerly sought after by investors and vigorously promoted by asset managers. But it is little more than a diversion.
Stock bubble not the real danger of the ESG investment boom
That people like Fink are urging intervention by multilateral development banks such as the World Bank is tacit acknowledgement of this, given that BlackRock, Vanguard, State Street and others have untold billions invested in ESG stocks and sustainable investments.
They may have their motives. The entry of multilateral development banks into the climate change battle on a much larger scale could bring organisation and resources into what is a largely uncoordinated exercise, especially if these banks can structure, guarantee and monitor project pipelines.
One example is the decision by the Asian Development Bank to join Citi, HSBC and Prudential in a joint venture to cut emissions. This aims to help developing Asian nations shut down coal-fired power plants early and replace the lost output with renewable energy.
Given such solutions, the trillions of dollars of private-sector financial assets currently flowing into nebulous forms of climate and other social investment would have a much better chance of producing concrete solutions. This is the only way that COP26 can hope to get real.
Anthony Rowley is a veteran journalist specialising in Asian economic and financial affairs