If you take away nothing else from this little blog, take that.
And save yourself an eighth-of-a-million pages of reading.
By Larry Fink
Mr. Fink is the chairman and chief executive of the investment company BlackRock.
As the leaders of the World Bank and the International Monetary Fund meet this week, they have a chance to reimagine how the world can use finance to reduce the risks from climate change.
For the economies working toward the goal of achieving by 2050 a net-zero world — one where we have removed as much of our carbon emissions as we produce — a huge obstacle will be mobilizing enough private investment to help developing countries do their part. In the coming decades, emissions from fast-growing emerging markets such as Brazil, India, Indonesia and South Africa are expected to increase at faster rates than those from rich countries like the United States, the members of the European Union and Japan. If this comes to pass, the entire world will be overwhelmed by the effects of climate change.
Achieving the net-zero transition will require unprecedented levels of investment in technology and infrastructure. Investments in low-carbon projects in poor countries will need to total more than $1 trillion a year — more than six times the current rate of investment of $150 billion.
Governments can’t finance this scale of investment alone, and emerging markets have struggled to attract private capital. Institutional investors, like pension funds and insurance companies, are wary of putting people’s savings into markets where there may be worries about political stability, credit risk and the enforceability of contracts. These types of investors have a duty to act in the best financial interests of their stakeholders. Making emerging markets a viable option for institutional investors will take structural reforms requiring many years — time the world doesn’t have.
So how do we get the necessary levels of investment in time?
Rich countries must put more taxpayer money to work in driving the net-zero transition abroad. Their current efforts, while growing, are insufficient — the current level of emerging-market climate investment includes just $16 billion of grants annually from the governments of developed countries.
Based on research by my company, BlackRock, stimulating $1 trillion per year of public and private investment to reduce emissions will require closer to $100 billion in grants or subsidies from countries that can afford it, like members of the Organization for Economic Cooperation and Development and China. While the figure seems daunting, especially as the world is recovering from the Covid pandemic, a failure to invest now will lead to greater costs later....
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