A protester puts on her headband before marching to the Ministry of Energy and Mineral Resources building in Jalan Merdeka Selatan on Nov 27, 2020. (JG Photo/Yudha Baskoro)
The Private Sector’s Climate Opportunities
BY :DAVID M. SOLOMON, MICHAEL R. BLOOMBERG
APRIL 27, 2021
Capital markets are an extraordinarily powerful tool in the fight against climate change. Government action is certainly critical. But ultimately, reducing emissions globally depends on the private sector recognizing the commercial opportunities that sustainability presents. That’s the inspiration behind a new partnership we are announcing today.
Together, Bloomberg, Bloomberg Philanthropies, and Goldman Sachs will make a meaningful contribution to the transition to net zero emissions by helping more businesses and investors capitalize on the opportunities that come with the move to clean energy. We’ll do this using two tools that are core to our organizations: capital and data.
First, we will harness investor demand to direct more capital toward climate transition investments where the need is most acute in developing markets. By marshaling more capital to finance clean energy projects, we will be able to support nations and their utilities in their transition from fossil fuels to renewable power. This will both help build a more resilient economy and improve public health.
Developing markets are especially critical because the global pandemic has set back clean energy investment there, as the latest report of the Climate Finance Leadership Initiative shows. While green energy investment in high-income markets increased by more than 20 percent last year, in developing markets, it decreased by more than 20 percent—and there was hardly any, to begin with. Lower-middle and low-income countries that account for half the world’s population receive just 5 percent and 3 percent, respectively, of the global clean energy investment.
To change this, our partnership will help launch an innovation fund that will deploy capital to energy transition projects across developing markets, with a special focus on South and Southeast Asia. The need is huge. In Indonesia, for example, jumpstarting renewable energy development by 2025 will require up to $90 billion. And in India, the government has set an ambitious renewable energy target for 2030 that requires $500 billion in investment.
We will help these nations and others find the capital to meet their goals, in part by identifying potential financing sources, from sovereign wealth funds to pension funds to private banks. We will also work alongside the Asian Development Bank (ADB) and other regional partners to spur greater investment in mass transit, green buildings, sustainable agriculture, and other sectors that have large carbon footprints. As ADB President Masatsuga Asakawa has noted, “We can no longer take a business-as-usual approach to climate change. We need to put ambitious climate actions at the center of development.”
As part of this effort, Bloomberg will also develop tools that will help investors align their portfolios with the transition to net-zero emissions and the need to limit global temperature rise to 1.5 degrees Celcius. These tools will include indices and other offerings that will help investors assess climate risks, rebalance portfolios, and reallocate capital to be aligned with the climate protection goals of the Paris Agreement.
The timing is right for this new partnership because investors increasingly have access to better, more complete information about climate risks and opportunities, thanks to the Task Force on Climate-related Financial Disclosures, which has been welcomed by the US Treasury and will be used as a foundation for the European Commission’s work on global climate reporting standards. So it is now possible to provide mainstream investors with greater transparency into how their portfolios are aligned with the climate transition – and we will help do exactly that.
To help achieve our two overarching goals – driving more capital to developing markets to accelerate their climate transition and developing new climate-friendly tools for all investors – Bloomberg Philanthropies will expand its global research and policy work, which is aimed at creating the market conditions to scale up clean energy industries. And this work will complement Goldman’s existing efforts to accelerate the movement of capital to climate solutions, including through the Restore Fund it recently created with Apple and Conservation International.
The challenge of climate change is too large for national governments to tackle alone. Close collaboration with the private sector can allow nations to make progress regardless of which way the political winds blow. And the more that we can show private sector investors and government officials that growing economies and fighting climate change go hand in hand, the faster we will be able to move to a clean-energy economy.
Michael R. Bloomberg is the founder and majority owner of Bloomberg LP, the parent company of Bloomberg News, UN Special Envoy on Climate Ambition and Solutions.
David M. Solomon is the chairman and chief executive officer of Goldman Sachs.