Finally, a Road to Somewhere
V P Nandakumar
MD & CEO, Manappuram Finance Ltd
‘All finance is climate finance’, is the resounding message coming from the recently-concluded C0P-28 conclave held in Dubai, UAE’
All finance is climate finance. For me, this is the most important takeaway from the 28th session of the UN Climate Change Conference — better known as COP 28 — held in Dubai, United Arab Emirates (UAE) between 30th November 2023 and 13th December 2023. In a nutshell, the message from the history-making UAE consensus, as the final document adopted by all parties to COP 28 is now known, is that the financial industry should go where the emission is to see the ‘accelerated transition’ to green energy sources, clean and transformative technologies at a rapid pace than ever to stop climate change and to make the planet a better, happier and safer place to live in. This means the financial firmament should gear up to address the intertwining risks and opportunities to get there – the net zero goal within the timeline.
Since a lot has already been written and spoken about the COP28, which some sceptics even termed as `dead on arrival’, I will confine this piece mostly to the role finance has to play to achieve the ultimate goal of the UAE declaration with a brief mention about the commitments made. This is because finance is the oil that powers the global growth engine and if finance gets the path right then the rest will follow on its trail.
Let me now list out a few landmark agreements achieved during the COP 28 conclave. To me, the first and foremost among the many accords materialised during the event was the landmark agreement to set up the loss and damage fund. In my view, this will accelerate the energy transition faster than before since it is for the first time the world’s biggest CO2 emitting nations agreeing to compensate for the damages they have done to the planet and their lesser rich cousins instead of seeking low emission and not-so rich countries to share the burden of transition equally. I would like to call this fund as a climate justice fund since it provides a level-playing field for not so rich nations for their sufferings from the sins of the richer nations. A large part of the credit should go to the Indian Government since it was the steadfast stand the nation as the former president of G-20 and the leader of the Global South that helped clinch this watershed deal. India can also take credit for the consensus decision to triple the green energy capacity by 2030 as it was first mooted by the New Delhi Leaders’ Declaration at the G20 meet.
Besides, the host UAE has set the ball rolling by vowing to set up, capitalise and operationalise a fund worth $30 billion to invest in climate friendly projects across the globe, with $5 billion earmarked for the Global South. Besides, UAE banks pledged to mobilise around $270 billion in green finance which will be deployed elsewhere. There are numerous other such pledges at the global climate meet which I am not mentioning to avoid risk repetition. At the same time, it is important that inter-governmental commitment to channelise finance to net zero goals are right, albeit small, steps in the right direction.
However, I firmly believe that, to make the UAE consensus work, a calibrated and synchronised action is needed, involving the governments, regulatory authorities and the financial institutions so that financial institutions use their leverage with portfolio companies to promptly set internal targets to achieve unit level net zero goals which should be a key monitorable in future project financing. There is also a felt need for a mechanism that could track such targets on a regular basis as in the case of financial reporting. This is because, if history is anything to go by, many a time big finance often found it convenient to toe the line that underscore the adage, `promises are hard to keep’.
As the host of COP28, Sultan Ahmed Al Jaber, rightly observed: “An agreement is only as good as its implementation”. Therefore, let us hope the historic consensus on climate action reached at the Dubai meet is put to action in its letter and spirit by all parties so that it will be the beginning of a new road that take the planet to somewhere to achieve the goal of a carbon free planet.
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