Ross Kerber, Simon Jessop

LONDON (Reuters – While the world has a lot of money, it is not spending enough to stop climate change. The Intergovernmental Panel on Climate Change has released its latest report, stating that as the clock runs down, policy interventions are needed urgently to increase finance flow.

This policy might include tax cuts for clean energy or buildings that are more efficient, ending subsidies of fossil fuels, and supporting the development of low carbon technologies.

Emma Cox (global climate leader, PwC) stated that “climate policy and finance are crucial for driving transformative changes.”

The IPCC Monday report on mitigating carbon emission has been compiled by 278 scientists. It was signed off by the majority of world governments.

It contained stark conclusions about what needs to be done to reduce greenhouse gas emissions so that global temperatures don’t rise more than 1.5 degrees Celsius (2.7 degree Fahrenheit).

The average climate investment across the globe must increase sixfold over the $640 billion it spent in 2020.

This is a small fraction of the global economic output that reached $84 trillion by 2020 according to World Bank.

Some parts of the globe, like Africa, would require a much greater increase in funding. Today, less that 5% of the climate finance budget is going to countries in need.

It would be necessary for governments to take action faster to address climate change in their own countries and deliver support to those who are most vulnerable.

The report stated that “the relatively slow implementation by countries and other stakeholders of the financial system to increase climate finance does not reflect neither the urgency for ambitious climate actions nor the economic justification for such action.”

Who pays?

Global climate negotiations have been plagued by the question of who pays for global energy transition and adaptation. The U.N summit in Glasgow was the latest venue to make a mess of failed promises.

The November conference was interrupted by rich countries revealing that they were going to miss the 2020 deadline. They will instead deliver $100 billion per year in climate finance until 2023.

Although policy is a powerful way to increase financing, there are other issues that must be overcome. Some financial institutions have been unable to invest more because of their poor understanding of climate risks.

According to the report, the 85% decrease in the cost of solar energy and 55% drop for wind power since 2010 will make it easier to finance renewable energy.

Eoin M. Murray, Head of Investment at Federated Hermes Limited said that “any further wakeup call by our industry is required of the necessity to shift to renewables?”

Investors already know the potential profit from investing in renewables over coal, however, there are other benefits, according to Gavin Templeton of advisory firm Pollination.

He said that there is a huge demand from the private sector to invest more, but more information was needed by investors on how each country’s energy transition will affect their sectors. The “clearance of this grey area can really unlock substantial capital.”