UN’S decarbonisation mission impossible

Folk still sceptical about the UN’s climate-caliphate ambitions should reflect on Mr Steiner’s closing remarks.

Financial assets of the global banking sector alone amount to USD135 trillion. Institutional investors represent somewhere in excess of another USD100 trillion – just to give you a sense of the magnitude here. This is why what Allianz and the other PDC members are trying to get others to recognise that you can invest public finance in an alternative pathway.

But if the mainstream financial system – which is 1,000 times more significant in terms of volume and scale is investing in the other direction, you are not going to see the kind of shifts [that UNEP and the UN want]. This is why what we are now seeing in the financial and insurance world is so significant – because it reinforces what Paris COP21 is trying to do with public policy and international co-operative instruments”.  (23.50min.)

According to the panel, annual global investment of USD1 trillion in RE infrastructure was ‘doable’.  In calendar 2014 it was USD270 billion. China claims it alone will be investing USD300 billion annually from 2016.

Mr Steiner was just warming up. Later on the 7 December he gave a stirring speech to the Sustainable Innovation Forum, Why not?

Ladies and gentlemen, if you want to see what sustainable innovation has to offer, take a look at the new Clean Voyage2, which spells out the need to shift from a linear economy that extracts, consumes and discards to low-carbon and resource-efficient growth and from subsidizing [fossil] fuels to accelerating clean renewable energy and improving efficiency. If we can use such innovation to deliver a healthy planet, with a healthy population that leaves nobody behind - why not?

Why not? As The Australian’s Graham Lloyd noted (11 December), COP21 resembled ‘a seductive echo-chamber where the political lessons of high electricity prices, failed government subsidy programs, major renewable energy company bankruptcies don’t seem to cut through the groundswell of good feelings for change.”

There was a belief that, “like a Magic Pudding”, COP21 would “release economic forces to rival the Industrial Revolution, liberate continents from poverty, increase food security and right historical wrongs.”

If eco-love was in the air in Paris, so was the scent of other people’s money. On 10 December, the Geneva-based UNEP FI, Washington-based World Resources Institute and 2Degrees Investing Initiative released a new report outlining ‘options for portfolio decarbonization - across asset classes, investor strategies, and metric families’: Climate Strategies and Metrics: Exploring Options for Institutional Investors. Investors keen to ‘help facilitate low-carbon change’ would find it a useful guide.

The report’s ‘core concept’ – according to the 2DegreesII website – is that institutional investors, banks, and financial service providers play “a key role in capital reallocation in line with 2°C climate goals. We call this mobilization and the related changes in investment frameworks ‘2° investing’.”

The 81-page document – compiled by 106 ‘technical working group members’ (page 80) – is designed to persuade institutional investors and money managers to restructure portfolios, embrace ‘climate friendliness’ and commit to lowering ‘carbon risk’.  Yet again nowhere in it is there a critique of the current state of climate science – or even a footnote on the areas of continuing controversy, such as model predictive claims, ex post facto EWE attribution studies and so on.

Climate friendliness: the intent of an investor to contribute to GHG emissions reductions and the transition to a low-carbon economy through investment activities.

There are two lessons here. If you hear a banker or fund manager claiming to be a global ‘climate-protector’ and pleading for an ‘ambitious and reliable regulatory environment’ - especially one with big bucks already invested in RE - hold on to your wallet. A carbon tax may be about to rise from the crypt and head you way.

If you are a financial-type – especially one employed by a PDC signatory - ask the company’s corporate lawyer to review your fiduciary duties. Be serious, too, about due diligence going forward. Better to be safe than sorry.

The planet’s future climate may – or may not – turn out be an insoluble mystery, but one thing is certain. Sooner or later, the wheels will come off Clean Voyage 2 (or 1.5).  For climate-$$-change is shaping up as the greatest boondoggle in history.