Taking the stage for the concluding panel of the day, Anna-Marie Slot, Global Sustainability Partner at Ashurst, set the tone for an insightful discussion about tangible impacts in sustainability finance. She opened with a pressing question for the panel: “What is the actual amount of capital that needs to shift to foster significant change?”
Tatjana Greil Castro, Co-Head of Public Markets at Muzinich, responded, emphasizing the simplicity of this inquiry, suggesting that the required data should be readily available. She proposed that if every financial institution—pension funds, insurance firms, and high-net-worth individuals—allocated just 1% of their financial assets to climate change initiatives, it would suffice to make a considerable impact. Greil Castro highlighted that addressing climate change effectively could protect the remaining 99% of financial returns; without such measures, global GDP could potentially plummet by 60%. “It is crucial to adopt a holistic perspective to preserve the economic prosperity built over centuries,” she asserted.
Slot then posed a critical follow-up: “So where do we progress from here?”
Deniz Harut, Executive Director of Pollination Group, emphasized the necessity of data availability and historical context for financial institutions to accurately assess and manage risks. He noted that the transition to sustainability represents a substantial disruption, revealing new risks but also significant opportunities. “There is a growing consensus that we must step outside our traditional comfort zones and risk tolerances to allocate capital effectively to these emergent areas.”
Addressing the matter of pension money, which operates on a different horizon, Peter Bachmann, Managing Director of Sustainable Infrastructure at Gresham House, shared insights on the UK Government’s efforts to unlock the approximately £300 billion sector, alongside strategies to engage with the corporate bond market, which is valued in the hundreds of trillions.
James Falzon from the Green Cities Programme at the European Bank for Reconstruction and Development (EBRD) discussed the initiative’s goal of linking individual investments to broader systemic outcomes. He acknowledged challenges related to static assessments and the importance of drawing connections between investments and intended outcomes at the municipal level.
Greil Castro pointed to recent difficulties in the government bonds market, highlighting the critical need to incorporate climate considerations into long-term investment strategies.
Bachmann underscored the importance of a holistic approach, urging the industry to tackle foundational issues, such as the problems posed by microplastics, and to target systemic change. “It is essential to channel capital into harder-to-reach sectors and address externalities; I advocate for the introduction of a carbon tax to facilitate this.”
Harut remarked on the ongoing flow of capital, stressing the importance of aligning it with suitable projects. He cited that the climate risk analytics market is valued at $40 billion and is projected to grow to a $2 trillion industry shortly. This reflects a significant trend within financial markets. He noted a substantial influx of capital into venture climate strategies, with over $80 billion raised in North America and Europe alone in the past year, significantly directed toward energy sectors and technologies requiring advancement, as well as carbon accounting and regulatory reporting, which showed remarkable growth.
Bachmann added that traditional venture capital and early-stage enterprises do not accommodate the transition’s capital-intensive requirements. “We need innovative startups focused on sustainability that also have the capacity to scale appropriately.”
Falzon outlined the EBRD’s demand-driven funding approach, which focuses on essential infrastructure sectors, including transport and urban redevelopment, while grappling with the complexities faced by these projects in a rapidly changing global environment.
Harut highlighted the importance of stakeholder engagement in identifying and supporting projects aligned with Pollination’s mission. He emphasized that addressing a broader range of social factors is critical for a just transition and successful innovation.
As the discussion wrapped up, Slot prompted the panelists to identify gaps in the current market, seeking insights into areas of demand lacking adequate supply:
– Bachmann identified a pressing need for major water projects, indicating Gresham House’s interest in these opportunities.
– Harut noted a gap in funding for nature finance and biodiversity projects that have advanced beyond initial design phases.
– Falzon pointed out the often-overlooked challenges in the adaptation and resilience sectors, highlighting the urgent need for action in response to extreme weather events.
In the closing session of the conference, Richard Peers from ResponsibleRisk summarized the objectives of the day’s discussions regarding sustainable city financing. He referenced a poll conducted at the beginning and end of the conference that asked attendees about their clarity on designing and financing sustainable cities. Notably, while initial responses were mixed, a majority reported increased confidence by the end.
Peers recapped the event’s focus on various innovative topics, including artificial intelligence, behavioral science, and nature-based solutions, all aimed at effectively financing sustainable urban development. He encouraged attendees to anticipate the results of an upcoming hackathon, where teams worked on harnessing AI and geospatial data to conceptualize sustainable cities.
In conclusion, Peers expressed optimism that the discussions had outlined a cohesive vision for sustainable urban environments. He acknowledged the challenges but emphasized the importance of fostering community engagement across both public and private sectors to drive meaningful progress.