The 379 trillion dollar question — and the answer to it
”This has never been an issue of a lack of money or finance, but about the rules that govern the allocation of that capital,” says economist Nick Robins. ”We know we have the finance to deliver the transition to sustainable development. Whether we achieve this is up to us.”
The bad news first: According to the International Monetary Fund we are currently using more than five per cent of global GDP to support fossil fuels and carbon pollution.
The good news: It would only require around one per cent of the same global GDP to save the climate.
Nick Robins is professor in practice for sustainable finances at the Grantham research institute, London School of Economics. He is also the co-founder of Carbon Tracker and the Stranded Assets Hypothesis.
On Earth Day Week 2020, the largest online climate conference in the world, he gave e key note speech on how to make the financial sector sustainable. Which could also be called ”the 379 trillion dollar question”. That staggering number was ”at the last count” the sum of assets across the financial system in banks and central banks, pension funds and insurance firms, stock markets and bond markets and the nest-eggs of citizen savers in all parts of this globe.
”379 trillion dollars is more than enough to deliver a rapid transition to a resilient, just and zero emissions economy by the middle of this century”, he says. ”The problem is that the rules of the game and the market incentives, the conventional wisdoms and daily routines make it easier and more profitable for these trillions to bet against the planet and ignore human development.”
Changing that system might seem just as easy as teaching a group of elephants how to figure skate. But Nick Robins says there is hope. And the hope is called sustainable finance.
At the time of the first Earth Day on April 22 1970, the idea that finance should be harnessed to achieve environmental and social progress was almost unheard of. Fifty years later, the numbers tells a different story. Investors, development banks, central banks and finance ministers all over the world are today cleaning up their portfolios and earmarking hundreds of millions of USD for climate conscious and sustainable investments only.
”What we need now is the acceleration and deepening of action to deliver the transformation in financial practices we need to see”, says Nick Robins.
He suggests five principles for the road ahead.
First, finance needs to be green.
”We have today pioneering investors committed to making their portfolios consistent with keeping global temperature rise to 1.5 Celsius by 2050. By 2030, this alignment with net zero and also with biodiversity conservation will need to be in place for all financial institutions and regulators.”
Second, finance needs to be just.
”To date, the social dimension of ESG has too often been silent, with human rights viewed as a risk rather than as an imperative to be respected. By 2030, all financial institutions and regulators will need to show how they are delivering positive social impact, eliminating poverty and reducing inequality.”
Third, finance needs to be resilient.
”The current pandemic has revealed once more just how fragile we are in the face of shocks. And these shocks are set to increase from climate change, degraded natural resources and pandemics. By 2030, all financial institutions and regulators will need to have real-world strategies for resilience, ensuring that they help both their clients and vulnerable communities to withstand and bounce back.”
Fourth, finance needs to be rooted.
”Over the past 50 years, finance has become global and increasingly seen as a system apart, with benefits flowing to metropolitan finance hubs, to Wall Street not Main Street. By 2030, all finance institutions and regulators will need to demonstrate how they are responding to place-based needs, including through new instruments and institutions rooted in local realities.”
Fifth, finance needs to be responsive.
”Many are missing out on even the most basic products: about a third of people are still without a bank account. By 2030, all financial institutions and regulators will need to be responsive to over 8 billion individuals and many more institutions, including providing the financial products that meet people’s aspirations for a better world.”
The immediate task at hand for the financial world is of course handling the Covid-19 crisis. Nick Robins says we must not the same mistake as we did after the financial crisis is 2008, when the ”green stimulus” programmes introduced by governments amounted to just over 16 per cent of the public finance boost.
”Governments must now make sure one hundred per cent of their Covid recovery plans are aligned with the Paris Agreement. All spending should be consistent with achieving net zero by 2050.”
He also suggests that the recovery packages should promote a coordinated multilateral response through the UN and the G20, and that particular consideration should be given to the needs of developing and emerging economies, where coronavirus impacts are set to be most severe and capital for the transition is in shortest supply.
” In this way, we could meet and exceed the longstanding pledge for $100 billion in annual North-South flows in climate finance. And we could make COP26 in 2021 the place where sustainable recovery plans are shared, upgraded and coordinated.”
He says the financing of these recovery plans must come in many ways. One route could be through increased government borrowing in the form of sovereign bonds.
”A coordinated issuance of green, social and sustainable sovereign bonds in the hundreds of billions of dollars by governments over the coming year would be both a practical mechanism for paying for a sustainable recovery. And it would be a powerful signal to the market.”
Nick Robins finds inspiration in John Maynard Keynes, the economist and investor whose ways of thinking guided the world out of the Great Depression in the 1930s.
In 1931, at the depth of the depression, Keynes wrote:
There is no reason why we should not feel ourselves to be free to be bold, to be open, to experiment, to take action, to try the possibility of things.
Nick Robins says:
”So let us be bold, be open, experiment, take action, try the possibility of things so that sustainable finance becomes the norm — and has contributed not just to a more effective and stable financial system, but to a regenerated Earth by the time of Earth Day 60 in 2030. ”
Written by Markus Lutteman
About Nick Robins
Nick Robins is Professor in Practice for Sustainable Finance at the London School of Economics in the UK. He has over 20 years experience in how to align the financial system with climate action and sustainable development, working as a global investor, in a major bank and with the UN.
“I am working to align the $370 trillion financial system with climate action and sustainable development. I am doing this in three main ways: first, exploring how finance can support a just transition to a resilient net zero economy; second, working with central banks to identify their role in greening the financial system; and third, looking at the key role played by sovereign bonds as a tool for sustainability. “ says Nick Robins
From 2014 to 2018, Nick was co-director of UN Environment’s Inquiry into a Sustainable Finance System. As part of this, Nick led country activities in Brazil, the EU, India, Italy and the UK, as well as thematic work focused on investors, insurance and green banking.
Before joining UNEP, he was Head of the Climate Change Centre of Excellence at HSBC. Prior to HSBC, Nick was head of Sustainable and Responsible Investment (SRI) funds at Henderson Global Investors. Nick has also worked at the International Institute for Environment and Development, the European Commission and the Business Council for Sustainable Development.
Nick has a BA in History from Cambridge University and an MSc in International Relations from LSE.
Read more and connect with professor Robins here: http://www.lse.ac.uk/GranthamInstitute/profile/nick-robins/
@NVJRobins1
About Earth Day Week, presented by We Don’t Have Time
- The world’s largest free and public online climate conference
- Participants from 140+ countries
- 50+ outreach partners with 85+ million followers on social media
- Around 450 000 daily viewers on social media
- 100+ speakers from five continents
… and we have only just begun!
Join us on our app and share your specific actions or support others combating climate change — NOW!
Earth Day Week was organized by the world’s largest social network for climate action, ‘We Don’t Have Time’ in collaboration with lead partners Exponential Roadmap and Earth Day Network, was streamed in the We Don’t Have Time app, on Facebook, Twitter, Instagram and on YouTube.
The live broadcast from Stockholm, Sweden and Washington D.C, USA also marked the 50th anniversary of Earth Day, April 22, 2020. The six-day program included key representatives from businesses, the United Nations, governments, academia, and scientific think-tanks, entrepreneurs, social media platforms, artists, campaigners, and civil society.
For more information about Earth Day Week;
www.wedonthavetime.org/earthday
For more information about We Don’t Have Time:
https://www.wedonthavetime.org/about-us
Download the We Don’t Have Time app:
https://www.wedonthavetime.org/app
Our social network is also available in the browser at: app.wedonthavetime.org
To watch the recorded versions of the daily broadcast;
