According to the International Renewable Energy Agreement, the world will need 5 trillion yen per year by 2030 to reach the Paris Agreement goal of limiting global warming to 1.5°C by achieving net-zero carbon emissions by 2050. There is a funding gap of $4 trillion compared to the $4 trillion that needs to be invested. The agency estimated this last year.
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COP28 climate summit concludes with agreement to 'transition' away from fossil fuels
COP28 climate summit concludes with agreement to 'transition' away from fossil fuels
Ma Jun, chairman of the Hong Kong Green Finance Association, said the global sustainable finance market has grown at least tenfold in the past decade, but most of the green investment has gone to renewable energy and electric vehicles. According to him, China's transition finance that meets international standards will account for only 1% of green finance transactions in 2023.
“Our challenge is to create an ecosystem that allows banks and insurers to enter the transition space without fear that their transactions will be seen as transition cleaning, and to ensure that resources are allocated to decarbonization activities,” Ma said. It's about making it possible,” Ma said. Last month's Climate Business Forum.
Transition finance refers to investments in industries that have high emissions but lack economically viable or reliable alternative low- or zero-emission manufacturing technologies.
Ma said many transition activities, such as the use of hydrogen in shipping and aviation, are not currently amenable to funding. The reason is that there are too many risks for commercially unproven technology at this early stage. Regulatory support is needed to make the project more profitable, he added.
Hong Kong, Singapore, mainland China, Japan and Taiwan have published or are drafting taxonomies of activities to be supported through guidance on transition funding and standards to enhance the reliability of transactions.
Still, investors and financiers have different notions of what activities deserve such a label, says Marisa Drew, chief sustainability officer at London-based Standard Chartered. Stated. In 2021, Standard Chartered announced plans to mobilize US$300 billion for sustainable finance by 2030.
“Transition is much more vague [than green activities],” she said. “It's much more dynamic and harder to define. Because in a year’s time it won’t be appropriate.”
For example, the bank recognizes that natural gas, a cleaner-burning fossil fuel than oil and coal, has a role to play in the world's energy transition, but classifies financing transactions for gas projects as transition finance. He said it would not.
“The reason is that, despite viable and affordable green alternatives, in some markets gas only drives fossil fuel emissions, while in others it does not and emissions That's really important for reductions,” Drew said.
“Nigeria is dependent on oil; [where] ”
Kamran Khan, a Singapore-based ESG director, said that although transition funds will remain subjective for quite some time, investors should not stop supporting them. [environment, social, governance] He is responsible for Asia Pacific, Middle East and Africa at Deutsche Bank and has over 20 years of experience in sustainable financing and investment.
“The return and quality of the investment is in the eyes of the investor,” he says.
Some investors may have the necessary ESG expertise and feel comfortable investing, while others may not, he said.
“This is the nature of non-financial or ESG considerations in the investment process.”
