As the world transitions from UN Climate Week to COP28 in Dubai later this year, there is a growing consensus on the need to move beyond empty promises and superficial efforts. It's time to focus on concrete mechanisms that empower the private sector and investors to channel more capital towards climate resilience and sustainable development.
While the public sector plays a pivotal role, scalable solutions demand significant commitments from private-sector resources. Climate change impacts both affluent and impoverished nations, making the mobilization of private capital an urgent priority.
Currently, many investors perceive climate-centric investments as aligned with \"social impact\" but worry about reduced profitability. Although experienced investors can deploy their capital profitably into areas like decarbonization and the energy transition, these investments often remain illiquid and confined to private-equity funds. This inaccessibility leaves ordinary investors and savers, who are most vulnerable to climate-induced food, water, and energy insecurities, on the sidelines.
The solution lies in creating climate investments that are not only profitable but also liquid and accessible to all. COP28 presents a unique opportunity to rethink and develop market solutions that harness digital innovation to scale promising models. To mobilize capital effectively, it's essential to tap into global savings from individual investors as well as institutions such as pension funds, insurers, and sovereign wealth funds.
Risk diversification can be achieved through retail-friendly, liquid, and easily accessible instruments like exchange-traded funds (ETFs). A sensible approach to constructing a long-term, climate-aligned investment strategy involves developing a diversified portfolio of assets that support climate financing directly or indirectly.
One key asset type is climate-resilient real estate and infrastructure. Investing in assets located in weather-proof and stable geographies with low climate exposure is crucial. These regions are expected to see significant appreciation as populations migrate from high-risk areas in the Southern Hemisphere to more resilient communities in North America, Northern Eurasia, and select regions in the Global South.
Reference(s):
cgtn.com
