The European Commission’s Directorate-General of Climate Action has commissioned a project to look at what Europe’s role should be in “shifting private finance towards climate-friendly Investments” – both within the EU and internationally.
As their brief says:
“Significant financial resources will be necessary to finance green growth and job creation in the EU as well as to support efforts by developing countries to address climate change. Global competition to attract capital is taking place; the challenge will be to redirect private finance from high carbon investments to low carbon and climate resilient investments.”
For those economists who immediately think “carbon pricing”, sorry, this is not about carbon prices – that’s a separate workstream in the EU, so no value in lobbying us. This is about other mechanisms, such as (to quote from the project brief):
- Regulatory measures that can create the right incentives for private sector involvement without burdening public resources.
- Financial instruments that can best leverage private resources.
- The optimum role of the public sector, governments and public banks in catalysing private sector investments in climate change.
- How best to use the EU Budget to mobilise low carbon investments.
This is a very cool brief – an opportunity to craft a winnable EU narrative about what has to happen and the EU’s role in doing that.
It’s clearly not just about bonds – although, as you might expect, we have a few suggestions around aggregation, covered bonds, credit enhancement, green city bonds and the like up our sleeve. We’ll be road-testing those as part of the project.
Bringing other perspectives are our core project partners:
- The Frankfurt School of Finance & Management’s UNEP Collaborating Centre for Climate & Sustainable Energy (it is a mouthful) in, yes you guessed it, Frankfurt.
- Triple E (Energy, Environment & Economics) Consulting, a part of TNO, the Netherlands Organisation for Applied Scientific Research, based in Rotterdam.
- CDC Climat, a part of the French government-owned Caisse des Dépôts bank, Paris-based.
Other project partners include the Climate Policy Initiative, 2° Investing Initiatives, CDP (formerly known as the Carbon Disclosure Project), ClimateKos and Portuguese agency Get2C.
And on top of that there’s a star-studded Advisory Committee with (so far) Mark Fulton, Karsten Loeffler from Allianz, HSBC’s Nick Robins, MSCI’s Linda-Eling Lee, Wolfgang Mostert, Natixis/Mirova’s Hervé Guez, Mercer’s Jane Ambachtsheer, KeplerCheuvreux’s Stephane Voisin, Finance Watch’s Benoit Lallemand, WWF’s Tony Long, French academic economist Florence Legros and IDDRI’s Thomas Spencer.
The project involves a close working relationship with the European Investment Bank and the International Finance Corporation (part of the World Bank), as well as a number of European Commission’s Directorates.
One of the energizing things about the project is that various arms of the Commission are now quite engaged on questions of better mobilizing private capital for climate solutions – that will make the job easier.
A core part of the project is a substantial consultation and collaboration process. Many many parties are working on bits of this puzzle at the moment; this project will need to synthesize existing thinking and proposals, as well as engage key groups like institutional investors around what will be the optimal measures.
The challenge will be to ensure that this (albeit modestly funded) project goes well beyond just another Brussels report; we will be working to build a coalition in support of viable proposals, and work with various arms of the Commission and member States in the process. We will need your help, ideas and political support to make this a successful project.