Financing a Greener Planet

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In order to decarbonize the world, a whole portfolio of mitigation needs to be developed and implemented across the highest carbon-emitting sectors. Although the pace of innovation has accelerated and investment has increased, the investment gap between what’s being spent currently and what needs to be spent is huge— as much as $3-$5+ trillion per year.

Capital is needed to fund the technologies required help markets evolve towards decarbonization. Advancements in battery technology, the hydrogen economy, carbon capture and storage, electrification, and efficiency require investment to become reality. Carbon management (i.e., carbon dioxide removal) and carbon pricing will help to align investment and economic activity with climate goals.

Public sector spending is crucial to funding climate action together with private investment. Luckily, green momentum in the investor community has led to an explosion in assets under management incorporating ESG considerations. At over $30 trillion, the challenge is putting these assets to work. Developing a clear green framework will help deploy ESG assets where they are most needed.

Financial innovation is the key to matching capital supply and demand. Instruments including project finance, green, social, and sustainability (GSS) bonds, SPACs, ‘efficiency as a service’, and green securitization are used to close the gap.

Given the scale of the issue, we’ve published Financing a Greener Planet in two volumes. Volume I — Catalyzing Private Capital for a Net Zero Emissions World — focuses on the three factors which indicate we are at a tipping point on climate action — policy and regulation, innovation, and green momentum in the investor community. Volume II — Bridging the Gap between Green Investment and Investors — is dedicated to the financial options available to close the massive climate investment gap.

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