The money is there the mind-numbing numbers that are almost too big to believe

By Ambrose Evans-Pritchard November 4, 2021 â€" 5.00pm

The exorbitant figures numb the mind. A $US130 trillion ($174 trillion) investor club launched by the lords of global finance in Scotland is beyond normal comprehension, so outlandish that one might justifiably suspect a giant con.

Critics are certainly right on one level: the Glasgow Financial Alliance for Net Zero does not quite do what it seems to say on the tin. Those trillions are merely the asset base of the 450 banks, fund managers, and wealth funds that have signed up to good behaviour, not the sums about to flow. It is all couched in Davos gobbledygook that seems out of place in the alien culture of a UN climate summit.

Mark Carney: “We now have the essential plumbing in place to move climate change from the fringes to the forefront of finance so that every financial decision takes climate change into account.” Credit:Getty

Yet the correct message to take away from finance day at COP26 is that vast sums of capital are indeed there for the taking. Global plutocrats are crawling over each other to get into the lucrative business of decarbonisation before rivals beat them to it, and to get out of fossils before they begin to lose serious sums and face the long-tail “asbestos” risk of perennial litigation.

“Make no mistake, the money is here, if the world wants to use it,” said Mark Carney, UN climate envoy and the Great Convenor of global green finance.

“But that money needs net zero-aligned projects, and then there’s a way to turn this into a very powerful virtuous circle: that’s the challenge.”

The problem is the plumbing, not the lack of money. On one side there is a mountainous stash of willing wealth looking for a low-carbon home, and on the other side are dozens of developing countries that crave the green investment and are eager to do the right thing, if only the dating agencies could match money and wants together.

“I don’t need your $US130 trillion Mr Carney: I need just $US270 billion that is really coming,” said Indonesia’s feisty finance minister, Sri Mulyani Indrawati, half in jest.

Indrawati said her country is trying to shut down its coal plants (early in their commercial life) but is still paying a penal borrowing cost for green Sukuk bonds to finance wind, solar, and geothermal as an alternative. “The market is not working: we’re not getting the green premium,” she said.

Chancellor Rishi Sunak says we must “rewire the entire global financial system” in order to shift abundant capital to where it ought to go, with the World Bank, the International Monetary Fund, and the multilateral bodies helping the developing countries get their act together so that the money can be absorbed.

Kenya has shown what can be done, mobilising its central bank and regulators to align all the country’s projects to meet gold standard net zero standards. Investors are impressed. Its power system will be 100 per cent carbon-free by 2030.

“Make no mistake, the money is here, if the world wants to use it.”

Mark Carney, UN climate envoy

Contrary to general belief - or the pious certitudes of Extinction Rebellion and those protesting outside the COP26 perimeter - high finance has already slashed fossil funding. That is why we now have a global energy crunch, and why it will become progressively more serious over the next two years.

Upstream and downstream investment in oil, gas, and coal peaked at $US1.3 trillion in 2014. It has since collapsed to nearer $US350 billion, and has not rebounded in the usual cyclical fashion with rising prices. Nor have the shares of oil majors such as Shell or Exxon, still languishing far below even pre-pandemic levels despite the oil rally. Markets are pricing in terminal run-off.

But renewable growth has not been enough to pick up the slack. Total energy investment is running at $US700 billion, half the maintenance funding needed to power the world’s $US86 trillion economy when it is in full expansion mode. We have a colossal mismatch.

“There is no green switch we can flip, and move from being economies where four fifths of global energy is supplied by fossil fuels today, and overnight be 100 per cent supplied by renewables,” said Carney.

It has been a mistake to vilify the whole fossil industry, lumping good with bad, in an indiscriminate rush to disinvest. Campaigners treat drillers with very low rates of methane leakage as if they were scarcely different from bad actors spewing out 20 times the stuff. Our heating, power, and industrial infrastructure still depends on that gas, so the green imperative is to buy it from the right sources, rather than abdicating in spasms of emotion.

We are only just now groping towards a coherent policy that rewards “best practice” and shuts down violators, and there is still near criminal stupidity. The easiest way for Western listed oil and gas companies to lower their carbon footprint and to get activists or courts off their backs is to sell the dirtiest assets, typically to predators operating in the moral twilight.

BlackRock’s Larry Fink said this is leading to obvious market arbitrage. “It doesn’t change the world at all. It makes the world even worse,” he said.

But that is to digress. The investment deficit must be plugged from the green side, and accelerated by orders of magnitude.

US Treasury secretary Janet Yellen labelled the climate fight as the “greatest economic opportunity of our time”Credit:Bloomberg

One might not think the money is available if you are distracted by the continued North-South wrangling over $US100 billion of annual funding promised by rich nations at Copenhagen in 2009 and never entirely delivered. But this shadow boxing has been overtaken by events, and by technology, since new wind or solar today undercut new fossil power for two thirds of the global population. The World Bank says the cheapest way to reach the 800 million people in Africa and Asia without electricity is to leapfrog straight to solar.

Carney said that vastly greater sums are required in any case to come close to cutting emissions 50 per cent by 2030, the UN’s “red alert” target and the relevant date at this juncture (2050 is so passé). Those funds will flow of their own accord once obstacles are removed.

“We need to scale up dramatically by an extra trillion a year. It means 2 per cent of GDP every year for decades, in every corner of the world,” he said.

This takes some alchemy: using seed money from multilateral agencies to certify and “derisk” projects, leveraging private money 10 or 12 times over. But it is doable.

Janet Yellen, the US treasury secretary, breezily floated a figure of $US100 trillion to $US150 trillion to reach Net Zero, but with equal breeziness in Glasgow described this as a jolly good thing, the “greatest economic opportunity of our time”. A Keynesian speaks. Ten trillion here, ten trillion there, peanuts to Croesus. Yet that is broadly the orthodoxy of the world’s economic establishment today.

It is hard to get your head around, but yes, the money is there.

Telegraph, London

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