Peter A. Petri (00:00:06):
Good morning. Um, my name is Peter Petrie. Uh, I'm a professor at the Brandeis International Business School and it's a great pleasure for me to welcome everyone to a discussion of global, uh, finance, global climate finance, uh, part of a week-long series on climate change that, uh, our business school organizes under the leadership of Professor Ben Gomes-Cassseres. An issue that's increasingly of interest obviously to, to, to students and professionals. Uh, although this will be a webinar, there will be questions and answers. Uh, please use the Q and A button, uh, to write down your question and, and it, we will get to it hopefully if there is time. Uh, this discussion comes at a time that is both, uh, anxious and, and hopeful. Uh, it's anxious because the acceleration and the severity of climate change are becoming the threat, are becoming more and more evident to anyone who cares to look and it's hopeful because there are some signs of change.
Peter A. Petri (00:01:08):
There is greater global recognition of the problem. There is a new government in Washington and we are looking forward to a summit in Glasgow at the end of this year, uh, on the fifth anniversary of the Paris Agreement. Uh, so with luck and this is what we'll talk about today. 2021 may turn out to be the year when things began to change. And it's a special privilege for me to welcome, uh, an extraordinary group, uh, with expertise on this topic, and a group by the way which has a lot of what Brandeis, uh, uh, Mark started as well. Uh, Omar Bhattacharya and Elida Reci are, are among our most formidable alumni and Dr. Catherine Mann now at Citi, uh, was a very distinguished member, a colleague of, uh, on our faculty for several years.
Peter A. Petri (00:02:01):
Um, to square the circle and I w- I, we don't wanna leave out Mr. Navid Hanif and we will, I hope you won't mind if we treat you as an honorary Brandeisan for the remainder of this, uh, discussion. Um, in any case, let me begin by introducing Elida Reci, our moderator. She came to Brandeis as a Fulbright scholar. She earned an MA in International Economics and Finance at Brandeis, uh, and has had a very distinguished career since. Uh, she's now at the, uh, uh, an economist at the Department of Economic and Social Affairs at the United Nations. Uh, her portfolio includes a, a, a, a very interesting range of influential publications and projects across the world. Um, but even before the UN, uh, she was, uh, she had, uh, a very wide experience as an advisor to the Prime Minister of Albania, other governments as the director in the Ministry of Finance. And even as a university lecturer and as the founder of a think tank on, on public policy. So Elida and, uh, our panelists, uh, welcome to what I'm sure will be a very exciting event. Thank you.
Elida Reci (00:03:14):
Um, thank you very much, Peter. Thank you for the introduction. Um, uh, yes, indeed. We are all delighted to be here at Brandeis and discuss one of the very important theme on climate change. Um, the w- one of the questions that we all have is, "Is the world coming together for ambitious change?" We have urgent goals, we need political leadership and we need to take collective actions. So without further ado, I would like to invite, um, our distinguished panelists. Um, I would like to start with Catherine Mann, with Global Chief Economist as the Citi since February 2018. Um, Catherine was Chief Economist at the OECD and Director of Economic, Economics Department, um, to the G20 from 2014, 2017.
Elida Reci (00:04:08):
Um, as Peter mentioned, she, um, had around of professorship at Brandeis, um, and she has served to a number of other think tanks, uh, in DC, including Patterson Institute for international Economics. Quite a comprehensive career, Catherine, including, um, the Senior International Economist on the President Council of Economic Advisor, advisor to the Chief Economist of the World Bank, and many other important position. Where you really had the opportunity to look at the development from the nationalized to the global ones, uh, from the academia to the policymaking. I'm really very much looking, uh, forward to the discussion today.
Elida Reci (00:04:52):
And, um, um, the bright ideas you'll have to share. Thank you for being with us. Um, I'd like to invite, um, Navid Hanif who's the Director of the Office of Sustainable Development at the Department of Economic and Social Affairs at DESA. Um, Navid has just finished one week of a very busy negotiations at the United Nations Economic and Social Council that reached to a final declaration by the ministers of finance, congratulation Navid. Um, Navid has a very distinguished career at the UN. He has been leading the work on a number of world summits such as the one on sustainable development in 2002, um, the one in 2005 and, um, he continuously is leading the work of the UN on financing for development. Um, there will be quite a lot to share and we're really delighted, uh, for you Navid to be here.
Elida Reci (00:05:55):
Um, I'd like to, um, invite a fellow Brandeisian, Amar Bhattacharya, uh, who's senior fellow at Global Economy and Development Center for Sustainable Development. Um, Amar has just published a very comprehensive together with, um, a number of, um, key experts in the, at the intersection of climate change and finance which is the report of the UNSG independent expert group on climate finance which was published in December 2020. He has been working exte- extensively with key leaders in climate change and finance including, um, uh, especially highlighting the publication, Better Recovery, Better World: Resetting Climate Actions in the Aftermath of COVID-19 Pandemic. Um, welcome, uh, Amar to the panel. Without any further ado, I'd like to pass the word to Amar, uh, for the presentation. If you don't mind me, I would like to remind of times which suppose, it's one of the tasks of the moderator. Um, Amar, you have 10 minutes for your presentation.
Amar Bhattacharya (00:07:12):
Um, thank you, um, let me just make sure I have the right one. Uh, just give me one second. Uh, yep, right here.
Elida Reci (00:07:23):
And, Amar, I have to ask, apologize, my moderation is, and I'd like to invite Peter Petri, I can't see Peter. Peter is Carl J. Shapiro Professor of International Finance at Brandeis. He has been our founding dean and one of the leading figures at the IBS. He's a Non-Resident Senior Fellow at the Brookings Institute and a Visiting Fellow at Patterson Institute. Um, Peter, you have such a comprehensive CV. I would rather let the, um, the participants to read that in the webpage. But I would like to highlight, um, your visiting scholar and professorship in number universities around the world in Kyoto, uh, Tokyo in Fudan, Shanghai, Beijing university and, um, being a full, and advising a number of international and regional organizations. Welcome.
Amar Bhattacharya (00:08:24):
Uh, thank you Elida. I hope all of you can see my screen. Um, uh, it's a real, not just a privilege but a pleasure to be here as part of the Brandeis family. Uh, an open secret, uh, Peter was my first professor. Uh, the one, the person I owe, uh, from, from moving from biology to economics and to the world since then. And I think Peter, I was your first class so, well, I think we, we do have a special connection and it has been a real pleasure over the years to have stayed so, so close to Peter and all as well. So I'm going to do a very quick overview that can form the basis for the panel that we will have. And I just want to underline some, some key themes, uh, in three web bots and I'll do it within the 10 minutes, uh, urgency and opportunity of climate action.
Amar Bhattacharya (00:09:22):
Uh, a second, the critical role of climate finance and bolstering and aligning climate finance, uh, which will be really the main element of the discussion of my fellow panelists. Um, so, you know, you know this well, the science of climate change is looking ever more worrying. Each IPCC report keeps getting more and more dire. We are beginning to see the effects of climate change coming through, uh, you know, much more fast and much more strongly. And we are beginning to get to tipping points that, you know, take us beyond anything that we know and with great mo- mounting risks. The current pot is far from sustainable, you know, uh, Paris, uh, you know, said we must, you know, uh and not exceed 2° and ideally get to 1.5°. We know the signs of what that means. If you want to get to 1.5°, you must get to net-zero emissions by mid century.
Amar Bhattacharya (00:10:25):
Uh, we also know that the difference between 1.5° and 2° is strongly significant. And as a result of that, the, the summit that President Biden is calling on April 22nd and John Kerry has been going around the globe marshaling support will focus very, very strongly on the collective goal of net-zero emissions by mid century. Um, while, uh, you know, we all recognize the urgency, I want to put it, the urgency in economic context and why we are in a moment of history in the next 15 years, you know, the stock or world's infrastructure will double if it is anything like the infrastructure we had before, uh, you know, we will not be where we need to be. And if the infrastructure of today remains the infrastructure of today, we will not be where we need to be. Uh, in the next 20 years, the world economy will double.
Amar Bhattacharya (00:11:26):
And in the next 20 years, urban space in the planet will double. In the next 40 years population will double. All of that has to be done at the same time as bringing out the emissions that I mentioned. And I just, you know, we have to do this across the key systems of energies, cities, food and land use, water, industry innovation and transport. One good news is, you know, the pace of tech- technology advancement and cost reductions has been moving much faster than expected. It allows us to leap frog, it allows us to bring down costs, it allows us to get innovation into the picture. So this is not just a story of costs and constraint. It's actually an opportunity to shift to a very, very different kind of growth bot full of opportunity, full of discovery. And indeed sustainability is the only way to the future.
Amar Bhattacharya (00:12:28):
So now let me move to climate finance, you know, uh, financing this intergenerational investment for low carbon climate reli- resilient, uh, transition means of mentoring and utilizing all pools of finance, you know, and we have to keep emphasizing that. The international climate finance, uh, accords have been very much of course based on the 100 billion commitment. It's a symbol of trust and it does play a very critical role. Uh, it is particularly important for the poorest and the vulnerable. It's also the lifeblood of the international financial system so all of that is very important. But without getting the private sector into the equation, we will not get where we need to get to. I also want to make one very important point and that's the connection between climate and development through sustainable infrastructure. You know, infrastructure is a complex task. It's long-term, large upfront investments, you know, spillovers and externalities and complex decision-making process because of the network externalities and because of policy induced risks.
Amar Bhattacharya (00:13:50):
At the same time, as I mentioned, we need to tackle the urgent, you know, uh, challenge of cutting carbon emissions. Uh, sustainable infrastructure therefore, at this point in time is the glue between building back better and the longterm climate change agenda. We see that very much, of course, in the, in the, in the agenda that is being set out by the Biden administration for the US itself and it applies in equal measure across the world. Let me now turn quickly to the finance side and the main emphasis here are twofold. One is the need, you know, if we are to get these investment transformation, you know, A, we will need to tackle the underlying policy constraints, you know, and that means A, being, being able to bring the right kind of investments to the table and to ensure that they are, that means that they are sustainable. Key here will be the policy parameters, especially carbon pricing but not just carbon pricing.
Amar Bhattacharya (00:15:00):
Second, we have to be able to utilize the tremendous pools of finance that are available. A good statistic is that off the long-term institutional investor finance that is available, less than 3% are actually invested in sustainable infra- infrastructure. And as far as emerging markets and developing countries are concerned, that is close to zero. I want to use this figure to lay out the architecture of climate finance as it stands and to think therefore of what needs to be done. So at the core, as I said is the 100 billion commitment by developed countries to developing countries to help them tackle climate action. We reached roughly about 79 billion of that in 20, uh, uh, uh, 18. We are unlikely to meet that goal by 2020 because of COVID pandemic but we have an opportunity in 2021 to really exceed that and through the support of green recovery.
Amar Bhattacharya (00:16:14):
And we need to build on that because ultimately the, what the 100 billion constitutes is the support mechanism for emerging mark- for developing countries and emerging markets. Second, we need particularly to augment the bilateral concessional part of it, total ground finance and the climate finance system is, uh, you know, appallingly low, 12 billion a year. That will need to be boosted significantly given the needs of poor and vulnerable countries, given the needs for adaptation and given the needs to support other, other pools of finance. Second, if, uh, third of, uh, a leverage mechanism are the multilateral cli-, are concessional funds. The most important of that is IDA. But the Green Climate Fund, the Global Environment Facility and, you know, the SIFFS as well as the Global Environment, uh, I mean, uh, In- Infrastructure Facility. These are all mechanisms or leveraging up. They are the mechanisms for bringing together the development finance side and also the private sector.
Amar Bhattacharya (00:17:28):
But the most crucial part of public finance are the development finance institutions, the multilateral development banks. They are stepping up, they will need to step up a lot more and we can come to that agenda in the discussion. In the remaining minute, I just want to talk about the private sector because that is really where we have to find the solutions at scale. To give you a order of magnitude at the moment of the roughly trillion dollars of investment in sustainable infrastructure in the emerging market in developing world, only a 100 billion comes from the private sector. If we want, if we nee- if we want to meet our target of at least doubling that in the next, you know, five years or so in order to meet the development and climate goals, the share of the private sector has to increase and increase quite dramatically. This means essentially new models of public private partnership that can both unlock inve- investment projects that are suitable for private sector investment.
Amar Bhattacharya (00:18:44):
But also the risk mitigation and taking not just a project by project approach but a more systematic approach to the mobilization of private finance, the tremendous amount of activity in this space, many, many private sector groups, the G20 is focused on it. There are many other initiatives. Again, we can come to that later. So I would say that the key opportunity is this year because the G7, the G20, the COP26, everybody is focused on the green recovery and on climate. And we should use this opportunity to really step up in the way that we need to to be able to solve not just the climate crisis but also the immediate challenge that has been exposed by the pandemic and all the vulnerabilities that had been exposed as a result of the pandemic. So let me stop with that and turn it back to Elida. Thank you.
Elida Reci (00:19:47):
Thank you very much Amar. Um, very very comprehensive presentation that you clearly highlighted the importance of carbon pricing, all pools of financing, the need for systematic approach to mobilization of private, uh, finance and the support mechanism for developing an emerging country. And you did so in 10 minutes. We're very very grateful to that. Um, I'll go to the first round of question to our distinguished panelists. Amar has argued that we are aiming for net-zero, zero by 2050 and tangible progress by 2030. He suggests that this is a feasible ambition. But are the funds within reach? Um, this is for Catherine. Um, Catherine, how do you see the role of private sectors? Our banks, asset managers, investors, entrepreneurs ready to scale up climate change finance. Is the money there indeed? Uh, what do you see as major challenges and opportunities? What can the private sector itself do and what support will it need from government to unlock those opportunities? [crosstalk 00:21:00]
Catherine L. Mann (00:21:02):
Great. Um, well thanks very much, uh, for that. Um, first the introduction, Amar, very, um, wide sweeping, uh, set of challenges, um, for, uh, both public and the private sector. Um, I'm gonna put my private sector hat on, um, as a Chief Economist at Citibank. Although I spent most of my time in, uh, in the public domain, I was the Chief Economist at the OECD before this so I sort of have a foot in both worlds. But I'm gonna talk about, um, the private finance side, uh, today. So, uh, Amar set out this challenge of, you know, there's a 100 billion dollar commitment, um, from the public, public sector. Uh, but of course the demands or the requirements, uh, to meet the climate finance objectives is in the trillions. So somehow we have to get from the public sector that's got a, a 100 billion, maybe it's got a 100 billion, uh, to something that's much larger and, and this has to be the role for the private sector.
Catherine L. Mann (00:22:00):
Um, you know, the bottom line is we cannot get to the climate, um, uh, goals, uh, without private sector mobilization. And the question is, how do we do that? And what are some of the constraints? So, you know, the first question is, well, you know, can the private sector just do g- get along with this on its own? Um, you know, ca- can it have sort of enough momentum within the private sector itself to, uh, to mobilize these funds for the objective of, uh, achieving, uh, climate innovation, climate, uh, adaptation, climate, uh, mitigation. Um, you know, there are some channels that we already see in terms of the private sector taking on, um, motivations, um, from consumers. Uh, consumers increasingly want to know the carbon footprint of, uh, or the ESG footprint more generally of the products that they are consuming. And they are demanding, uh, not only, uh, superior carbon footprints but they're also demanding transparency with regard to carbon footprints.
Catherine L. Mann (00:23:04):
And as I say, we could, we could see, say this more generally about ESG. So you've got consumer demand for firms to people transparent about their carbon footprint of their products and services but also, um, uh, you know, what the, uh, uh, uh, financing of that is. Investors, investors increasingly want to be able to invest to see this as an opportunity for an, for getting a higher return. Let's, let's face it, that's what investors want, right? They want a higher return and they see the market for, um, uh, clean investments, green investments, uh, debrowning investments as one that is going to yield a higher return. And so that's where they want to put their financial, financial dollar. Uh, there are also borrowers, borrowers want to be able to borrow, you know, to show themselves as borrowing funds in order to, uh, green their operations, green their products.
Catherine L. Mann (00:24:06):
And again, maybe they want to do that as, as a, you know, a sort of motivation for, for, for, for general reasons. But they also see it, it beneficial both on the consumer side and on the shareholder side. So you have these three players in the private sector, the consumers, the investors and the borrowers, uh, and the shareholders, uh, motivating firms to undertake a more climate oriented, uh, strategy of capital allocation. You know, I gotta say though, not enough, uh, that's not enough. And, and the question is, why is it just not enough to have the private sector actors, uh, be the ones to, to, uh, do this all- capital allocation? Um, the bottom line here a- a- and why, why these three actors or four actors, if you wanna, you know, separate consumers and shareholders, consumers, investors, borrowers, and shareholders, why is that not enough? Why can they not actually solve the climate problem of financing for a more climate, uh, friendly, um, uh, investor and outcome capital allocation?
Catherine L. Mann (00:25:11):
Why can't they do that on their own? The bottom line, this is micro 101. Climate is an externality and we know that the private market cannot solve for completing a market that has basic externalities where the private marginal return is different from the social marginal return. So you fundamentally have a micro 101 challenge that has to be addressed in order to incentivize or create the proper incentives for proper capital allocation, uh, to achieve the climate objectives. So, you know, what do we do to ha- to solve this externality? This is fundamentally a problem for, uh, the governments, however you want to define them, the public authorities. So I'd like to go through, just quickly, what are some of the challenges facing the government authorities, uh, both monetary policy and, and fiscal authorities.
Catherine L. Mann (00:26:12):
And I think I only have like, uh, uh, negative one minute. So I'll, I'll leave most of this for the second round. Um, the financial system is currently, the financial authorities, uh, both central banks and regulators are now, are effectively being the ones in the second best way to try to discipline firms, uh, to discipline their capital allocation through the channel of total f- climate finance disclosure, and as, uh, p- uh, motivated by the Financial Stability Board. In other words, taking on climate risk, uh, and exposure on the balance sheet of, uh, the financial institutions, uh, them doing that is the channel through which, uh, we might get additional motivation for the, uh, capital allocation by firms to be more directed towards, uh, the climate finance goals. It is second best climate pr- uh, price to complete. The carbon market would be the best but, you know, the second best is the monetary authorities and regulators to take on that role. There are a lot of challenges for doing that.
Catherine L. Mann (00:27:15):
The second one though, of course, is what about, um, the fiscal authorities, fiscal authorities have three different tools, tax spend and rules and regulations. And of course, what we're looking at is the size of the multipliers for fiscal authorities for green oriented fiscal expenditures, uh, expenditures tax and re- rules and regulations, as I say, three levers. Uh, and what we can show is that, uh, the multipliers between fiscal expenditures tax and rules and regulations to the, uh, private se- private outcomes, the multipliers which are the measure of catalyzing private sector contributions, co- uh, financing, uh, and capital allocation and consumer behavior as well. Those multipliers for green are larger than they are for, uh, kind of everything else that governments do. So the combination of the financial authorities and the fiscal authorities, these are both second best strategies to achieve, um, the objective of disciplining, um, the private sector towards a more, uh, green capital allocation. These are both second best but working together, uh, they can try to get closer to the needs of the trillions that Amar put out in his opening remarks.
Elida Reci (00:28:34):
Uh, thank you very much Catherine. Um, a quite some, quite a concise way of addressing, um, the externalities and the, the way, how the challenges and opportunities. Um, uh, the se- the next set of question will be for Navid. Navid how do you see the role of public sector in setting policy and regulatory framework to stimulate climate finance? Can the global community and private companies work together to unlock climate finance opportunities? Can we build new global institutional frameworks for public private dialogue and cooperation? The floor is yours.
Navid Hanif (00:29:15):
Thank you Elida. And I'm really honored to join such a distinguished panelists and Peter, thank you so much for giving me the honorary status of Brandeis alumnus. I'm, I'm really humbled by this honor but delighted to accept it. And Elida, thank you for this opportunity. Let me, I want to, I think I'm gonna get through a few of these discussions. So, well, I want to make two broad points before I come to Elida's specific question. And I, forgive me if it's gender, it's not gender neutral, it's man in the moment bend of history that we are going through. Our decisions and the phase we are going through because of the pandemic will determine our future. And we have been, uh, uh, Amar knows that we have been trying to solve this puzzle and world of washed and cheap capital. And the world which has immense demand from a large number of countries.
Navid Hanif (00:30:19):
Why aren't they coming together? Demand and supply should find a way to meet. It's not happening. So my bigger observation for all of you is, it's time to re-imagine capitalism. Value which is driven by values. That's the moment we are living in. Let me come to Elida's specific question. I think nothing has driven more intensively than the con- COVID 19 pandemic, a new era of public sector engagement in the economy. And we have seen in this country and all over the world. But I also see the tide is turning in the private sector with increase interest in sustainable business models and investment. And we are learning this by everyday exchanges with them. And this is a unique opportunity but it can only be capitalized if we come together. We imagine things and not to find solutions with yesteryear tools.
Navid Hanif (00:31:26):
Let me highlight three concrete measures we need to focus on right now. I think our, clearly conveyed that we have to align the current investments with the Paris Agreement. And that applies to the COVID-19 Stimulus Funds which has increased spending by the public sector. They should all go towards the Paris Agreement SDGs of course, and net-zero commitments. What do the SDGs reflect? If you look at it, 17 SDGs, they all reflect market failures and that's when public intervention is needed. But the private sector also needs to find ways to address these failures. I know it's not their responsibility but they need to deal with them. And Catherine just mentioned private sector has to recognize the shift in consumer behaviors, invest into sustainable production capacity and financial instruments aligned with the SDGs. And public sector has to take complementary actions to start the enabling environment through regulatory action, targeted fiscal policies. And of course, I also believe in concrete measures, setting mandatory reporting standards and fiscal policies.
Navid Hanif (00:32:50):
Let me come to my second point. That is the global level actions. Is there urgent need to channel investments toward SDG aligned sectors? And gap invest- in- infrastructure investment is glaring. I'm gonna mention that. And we know that 92% of the SDGs can be achieved if we invest in sustainable infrastructure. What is the UN doing? And that's what the leaders crux of this question is. The secretarial has brought together 30 CEOs from all over the world. It's called the Global Investors for Sustainable Development Alliance. And they are working actively to shift their investments towards the SDGs. But the challenges they are facing, they want instruments to de-risk their investments. And not just at a project by project level which Amar mentioned they want to create structures at the global level which can give them the platforms to come to the scale that the SDGs demand. As of now, we are nowhere near the level of inve- investment needed for achieving the Sustainable Development Goals by 2030.
Navid Hanif (00:34:15):
Third, I think we need commensurate changes to the global architecture and align the whole global financial system with the 2030 agenda. And that would include introduction of SDG and climate considerations in global financial stability. You must have seen many central bankers are doing it. But it has to become a global norm. We must also encourage in- innovation financial instruments. And that is where we are lagging behind. Financial engineering is not embedded in the current context. We are still using old instruments to deal with the challenges of the future. So we need new innovative instruments of schools and new SDG bonds. Public and private, they have to come together, there is no option. If they want to, they have to work together but by rethinking, re-imagining capitalism and create regulatory environment which shifts the private sector's behavior towards long-ter- long-terms, the political economy of decision-making has to change. Thank you Elida.
Elida Reci (00:35:34):
Um, thank you Navid. Um, I'd like to ask the panelists that if you feel you have something to add to the question and discussion, please, uh, flag your interests and the space will be provided. Um, so before we go to the second round, would anyone else have any comment or provide additional points?
Navid Hanif (00:35:59):
Let me add Elida, the private sector, because we are interacting them very closely. For instance, they are looking towards the Glasgow Summit on climate change. They are repeatedly conveying that the governments need to also look at long-term results. They should not look for just towards the reelection campaigns. And that is a fundamental shift that is required by the public sector for the private sector to take bold measures. Second, perception has to change. When we talk of frontier markets, private sector usually think of risks almost in every sphere of activity in those frontier markets. So we need to change the mindset also. Thank you.
Elida Reci (00:36:54):
Thank you Navid.
Catherine L. Mann (00:36:55):
So, I, I'm, I'm gonna jump in here because, um, those are laudable goals, um, to encourage both the, uh, private sector to have longterm objectives in its, um, in its, uh, pursuit of, um, it's uh, it's profits, right? And that is what they do. Uh, laudable goal, absolutely, agree with it. Um, laudable goal to have politicians look beyond their reelection campaign. Definitely a laudable goal. Um, but I'm not sure I want to depend on those two things, uh, to, uh, get me to my goal line, which is, um, mobilizing more, uh, financial resources, uh, in the private sector, in the pursuit of, uh, uh, uh, the climate objectives through improved capital allocation. Uh, so I guess I'm trying to break down from the lofty goals to some of the fundamental challenges that the private sector financial community has to, to get us from where we are to, to where we need to be.
Catherine L. Mann (00:38:12):
And I'm, and I, I focused in my first remarks on the enabling environment, very, very appropriately put, enabling environment. Um, and you know, a carbon tax would be the best one to do, right? I mean, uh, that's what we want as, as economists, as, as anybody who has to allocate capital in the face of relative prices in the, in the environment, you want a, you want a carbon tax. Um, but, uh, and in fact, a lot of companies even are saying, "Please give us a carbon tax. Just, you know, set one out there and we will allocate capital , uh, in light of that basic carbon price." But we're not, we don't have that. We do not have the, um, um, the po- po- political agreement on that. There should be one, much less of what it should be.
Catherine L. Mann (00:39:02):
So all of these, um, alternative strategies through the total climate finance, finance disclosure which is the private, uh, which is the public monetary, um, a collection of monetary authorities in the, in the ne- uh, and regulators network for greening financial system is to place in, in, in, put into place the monetary side to try to get the financial, private financial system to discipline, uh, capital allocation, um, through the exposure of risks on the balance sheet of those private financial institutions as well as on the, on the public sector side to try to focus on the higher multipliers associated with green investment. But let me be very specific about three areas that the private sector, uh, financial community, uh, has when we talk about motivating or mobilizing more private sector finance for the objectives of, of green finance.
Catherine L. Mann (00:39:53):
Um, you know, there's a lot of talk about, there's a lot of long-term money about there, uh, uh, Navid you talked about the awash with capital, I agree, the world is awash in capital. Um, most of it's not being used for anything productive, uh, including a lot of financial engineering. So why isn't it going to, uh, you know, long-term capital long-term assets? Liquidity, you know, people who have long-term objectives like a pension fund, for example, um, they might have a long-term liability but that doesn't mean that they want to match it with an illiquid long-term asset. So there's a challenge of taking the illiquid long-term assets that are associated with many of the climate finance, um, uh, challenges whether it be water, whether it be, um, you know, infrastructure, uh, whether it be innovation. You have to, you have to be able to, to create liquid assets out of those long-term assets.
Catherine L. Mann (00:40:46):
Um, and you know, one, one way, and it has been out there for so- quite some time is, is, uh, you know, um, collateralized, uh, uh, collateralized asset, uh, asset markets. Um, and using, you know, using the, the long-term assets that are illiquid create li- liquid assets by packaging them up and collateralized obligations. We had a, kind of a history of collateralized mortgage obligations not working out so well. Um, and maybe we're gonna see this again. The second risk is for a lot of emerging markets, the magnitude of the bonds that are required finance some of these, uh, projects are way too big for the local bond markets. Um, and so there's inherently a currency risk, an extended risk associated with those long-term bonds, um, because they have to be floated in a different market. And they're not gonna be floated to local currency in a, a non-local market.
Catherine L. Mann (00:41:44):
So you've got a basic currency risk that lasts for a very long time. And, um, you know, the private financial markets are not so good at long-term currency risks. They're really good at coming up with hedges for the longer term, uh, for short term. But, you know, I would, after a couple of years you don't get anything, um, that's gonna match your currency exposure. Um, the third risk frankly, is, is policy change risk, um, a lot of climate related, um, expenditures, uh, and, and, and infrastructure is, has, has, has associated with it, uh, prices, user fees or prices or whatever that are public, publicly determined. Um, they're not privately determined by, by and large. Um, and so then you have a policy risk for, that is, that is in there for a long period of time. And how do you, how do you, um, how do you hedge, if you're, you know, private financial institution, uh, uh, borrower, investor you wanna hedge and, and how do you hedge that is, can be a challenge.
Catherine L. Mann (00:42:41):
Um, and so one strategy is to talk about first loss. So you have a, a public sector, um, fund that, that is a takes on the first loss if there is a policy change, that's a, that's another strategy. So there are financial, you know, and, you know, I, I, I'd have to say the financial markets are extremely creative in coming up with solutions to problems. Um, and, uh, and, you know, if we set in place the right backdrop, whether it be rating agencies, whether it be, um, you know, Basel V which has climate finance explicitly in it. Uh, whether it be, um, some other mechanism, um, you know, on, on disclosure, measurement and disclosure of risks, pretty challenging in and of themselves. You will get the financial sector coming up with instruments to finance it. If we can solve these fundamentals of, has to be liquid, it's longterm currency risk and it's long-term policy risk. So how do you, how do you address those, um, in the context of, uh, of mobilizing private sector finance?
Elida Reci (00:43:54):
Thank you.
Amar Bhattacharya (00:43:54):
Uh, Elida, I don't want to take your time but if I could just take one minute to, to just extend this conversation. So based on what has just been said and very compellingly, so there is a grand bargain to be made and the elements of the grand bargain are that policy in the developing and emerging market world has to be fit for purpose to unlock the scale and quality of investments and supported by the right kinds of policies and governance. Second, there is bargain to be made in taking those investment opportunities and translating them into realized investment, investments and projects. And to transform those into, as Catherine said, something that is liquid and something that deals with not only currency risks but also, as she underscored, the policy and use risk over the long term.
Amar Bhattacharya (00:44:58):
And the third thing we need to do is to of course get a replicable, scalable arrangement so that investors can come in not only for the early stage risk but also for the takeout finance that will be needed. And the glue behind this is a compact between countries, the multilateral development financial and other development financial institutions including local ones and the private sector. And the key is really creating a replicable scalable game. That's what we are in right now for, and this year 2021 is the year to try and really push the ambition on that.
Elida Reci (00:45:45):
Uh, thank you Catherine. Thank you very much Amar. Um, quite available, um, um, insights and findings. We really, really appreciate you sharing. Um, without further ado, let me go to the second round of question and try to manage the time, uh, for question and answer from our audience as well. So Catherine, I'm starting with you again, um, will private investor on their own prioritize climate change in their decision? Um, how can we strengthen the role of sustainability ESG and climate goal in private investment? You tackle those issue in the previous question somehow but if you can, um, uh, share furthermore on this matter, it will be, it will be quite useful. Thank you.
Catherine L. Mann (00:46:38):
I think I've addressed, um, much of that, uh, challenge which is that it's, it's really critical that, um, we have, uh, a strategy to communicate to the private sector, uh, what are the rules of the game. Um, and it's because as I say, basic externality problem, you need to have intervention by, uh, authorities, uh, how- however you wanna define them, uh, in order to create, um, to complete the market for carbon. Um, and so, uh, as I say, the two strategies that currently are on offer, um, probably more well-developed is the total climate finance disclosure, um, being, uh, promulgated by the Financial Stability Board, um, uh, to, uh, to, uh, undertake the, um, classification of exposures and risks to climate on the balance sheet of the individual financial institution. And through that exposure, uh, total climate finance disclosure on the balance sheet of the financial institutions that they push forward to, uh, discipline capital allocation, um, uh, capital allocation by, uh, private firms, uh, towards the climate goals in, in terms of their in- in- investment choices.
Catherine L. Mann (00:47:53):
You know, there's a problem here in that, not everybody in the financial sector comes underneath the umbrella of the regulatory authorities that are, um, uh, uh, pushing for this total climate finance disclosure. And so what you end up with which is possible, you end up with a very gleek green balance sheet of say a bank. Uh, but you push off all of the climate exposure and climate risk and climate change outcomes, bad outcomes to unregulated financial int- uh, unregulated parts of the financial sector. So you get disintermediation of the climate, um, outcome from, uh, from the ones that are, uh, everybody that, you know, the spotlight is on a certain set of financial institutions, uh, and they clean up their balance sheets and they just push it off to someplace else. So the problem is that, um, measurement of climate exposure on the balance sheets of an institution, or, uh, or you have of an individual organization or like a private, uh, company. Uh, measurement and ex- disclosure of that doesn't necessarily achieve the outcome of, uh, improving climate, unless it is broad-based, unless everybody gets, uh, on board.
Catherine L. Mann (00:49:10):
So you end up with this having to be, um, a global project and, and as Amar was saying, it's a, it's a grand bargain, um, between, uh, all, not just the private and the public sector but also between, uh, among all countries. Because otherwise all you end up doing is, is moving climate exposures around and not ending up with, uh, the goal line which is, uh, reduced carbon emissions which is, that is the goal line. Um, and so you don't, you don't get to like give yourself a gold star because you're clean if all you've done is sent off your dirty stuff to someplace else. So that's really, I think the biggest issue.
Elida Reci (00:49:47):
Thank you very much, Catherine. Um, I'd like to ask the other panelists if you'd like to add anything in here. Okay. So let me go to Navid. Navid, those questions are for you. How important is public infrastructure for climate change? You mentioned a little bit in previous question, uh, but, um, if you can further elaborate we'll appreciate. Can we integrate climate into sustainable development? Do national financing framework for climate change, adequately integrate private financing?
Navid Hanif (00:50:24):
Thank you Elida. The answer to your first question is very straight. Investment infrastructure is critical. It impacts 92% of the SDGs and climate goals. So actually I think in the infa- infrastructure investment can literally pave the way for achieving the SDGs and I mentioned that in my previous intervention. The challenge we are facing with Catherine is saying the problem is, it's illiquid. And G20 has been trying at least for the last 10 years to make it an asset class or a sub asset class. But it has its own risks. So we need to tackle this issue head on. How do we make this into a liquid investment while mini- minimizing the risks of doing so? So infrastructure will also kickstart economic growth and create jobs. The three challenge there is simply not enough investment. And I have mentioned in my opening remarks, the gap is really very big.
Navid Hanif (00:51:27):
$1 trillion is estimated to be the required annually for sustainable infrastructure in developing countries. And public's finance is way below that level. And your second question is climate finance and development finance must be closely aligned. No doubt about it. That is the only way we'll ensure that we meet our objectives in time. But I must want, I want to emphasize two things very clearly, "green" alone is not enough. Look at the social consequences of this shift. If we say that and that there, I, I agree with the idea of carbon taxation but let's be very real. We may have to do with the regulations until we will get to even carbon taxation. Which is also a key element or just transition. You can't force countries to go for transition when they're dealing with the social impact of such transitions. So these factors would also come into play in the global banking on global pact that we want to strike.
Navid Hanif (00:52:33):
Public, private and partnerships are key. But at the same time we should realize these are not a panacea. We need to have strong guidelines in place because the privatization of profits and making the costs public is not the way to go. And that's why we have, the UN has repeatedly emphasized build capacity in countries to manage these such partnerships. And on the blended finance, there is a proposal by the investors for Sustainable Development Alliance to have a Global Blended Finance Fund. Exactly to deal with the problems that Catherine mentioned, first loss guarantees, public money is deployed to de-risk investments by the private sector. But we are also doing something very meaningful at the national level. Catherine mentioned the problem of policy and predictability and we acknowledge that. So the Integrated National Financing Frameworks are designed to bring transparency, policy coherence and predictability the way governments finance their ambition to achieve the 2030 agenda.
Navid Hanif (00:53:54):
But let me end by highlighting, we need a breakthrough to overcome these bottlenecks, to challenge private investment. Catherine and Amar have mentioned few ideas, and just look at the number of green bonds issues was a little less than 300 billion in 2020. Social and sustainability linked bonds are around 60 billion. Totally global assets and capital markets that around 303. Again, it's not a question of charity. I think each and every SDG makes a business sense. If we de-risk investments, create conducive conditions for private capital to flow, we have an opportunity here. And let me share with you one interesting thing we did a couple of years ago, we ran a Google search on SDG investment gap and we had almost thousand entries.
Navid Hanif (00:54:49):
We then searched by an SDG investment opportunity, I got only six entries. That was couple of years ago. So we have to present this as an opportunity for the private sector to engage. And I'm not underestimating the complexity of creating the environment but I want to emphasize the shift is needed in the mindset because otherwise we will not go into frontier markets and invest where the investment is badly needed and governments have to do their part. Thank you.
Elida Reci (00:55:26):
Thank you very much Navid. Um, any of the panelists would like to add anything in here? No. Um, with your permission, I'd like to take some of the questions from the chat box. Uh, we have had quite a lot of interest on that. So, um, we have a question for Amar. You mentioned the 100 billion goal of investment which will be used in part to help development, developing country reduce their carbon emission. The US is the second biggest contributor to global warming and India is the third. Why don't we concentrate on helping the US and India reach zero emission? Would that be more effective? The carbon emission of almost all developing country equal to those of India and US. If this problem is a puzzle of capital allocation, wouldn't concentration on two countries be more efficient than concentration on many? I, I'm reading the question as they are being provided.
Amar Bhattacharya (00:56:30):
Do you want me to respond, uh, uh, Elida or wait?
Elida Reci (00:56:34):
No. I think, I think if you may, that'll be wonderful.
Amar Bhattacharya (00:56:37):
Okay. Thank you, thank you so much. So, um, indeed, um, uh, the US is the largest, uh, has been historically the largest contributed to carbon emissions. Uh, it is now the second largest of the flow but the largest in terms of the stock. Um, and India is the smallest in terms of per capita amongst the smallest in the world. But when, you know, in a business as usual environment would become the largest emitter sometime in the 2030s. So certainly focusing on those two countries is very important. Um, and there are, uh, there is a great opportunity actually, uh, for both to work together. Uh, secretary Kerry, uh, uh, I mean, Kerry was, uh, in India about 10 days ago. Uh, very much talking about a India US approach. Uh, there was great, I would say positivism coming out of that, those discussions. And here, I want to emphasi- emphasize something that Navid said, which is not just thinking about this as a climate challenge but a development opportunity.
Amar Bhattacharya (00:57:51):
I mean, you know, that I think is a fundamental point. The systems changes and the infrastructure requirements that countries like India, the countries like Pakistan et cetera will have are just once in a history moment. And if we get it right then we will not just get climate right, we will get development right. And so they'd rather the discussion therefore is how one needs to support countries like, like these. And the answer is essentially through accelerating technology progress and diffusion and ensuring that we can have the finance in the way that the discussion previously has underscored. But I want to also say it's not enough just to focus on India and the US. I mean, just to put it in perspective, the total combined emission of the two countries is about 22% of the world. So we need to really encompass everybody in the system. And let's not forget that again, coming back to we not, not only have to focus on emissions, we also have to focus on the damage that climate is doing, especially, you know, in the developing world.
Amar Bhattacharya (00:59:08):
And that's why focusing on Africa becomes so important. Because Africa is the most affected and the future of climate mitigation also lies in Africa because that's where a lot of the future people lie. So we should look at this very much as a global endeavor and the ambition tool around net-zero is a way to focus the mind. So you can say the science tells us we need to drive to net-zero by 2050. But we can't wait until 2050. So what are the goals that must be set for 2030? And that is very big discussion coming up in this Biden Summit that will happen, you know, in a, in a couple of week or less, and, and only about a week actually from now. And that will be, you know, okay for you to talk about net-zero by 20, 2050, but what is your commitment for 2030?
Amar Bhattacharya (01:00:12):
And Europe has, for example, committed to, you know, 55 reduct- % reduction by 2030. Japan is committing to, in about 30, less than 30%. Canada around the same magnitude. And everybody is looking for US leadership for that number to start with the fight. It's a good example of pressure. And all - equally there were, you know, where this pressure has to flow to every country as Catherine mentioned. It has to be a global endeavor between the countries. It has to flow to the private sector and it has to flow to the Development Finance Institution. Are you doing what is necessary to help support net-zero? So I think having the net-zero as a North star right now but translate it into metrics about what it means and using science-based standards is a powerful way.
Elida Reci (01:01:12):
Thank you, thank you very much Amar.
Amar Bhattacharya (01:01:13):
Cou- could I-
Elida Reci (01:01:14):
Yes. Catherine.
Catherine L. Mann (01:01:15):
... could I, um, uh, make two comments, uh, the first is, um, picking up on what Amar just said about having net-zero as the North star. I think that's a great idea but, um, the entire development challenge sh- which is a, i- i- it's a big challenge, right? To tie that just to climate, I, I think is a mistake. Um, and the reason why is that the development challenge is a very multifaceted one. And, uh, to sort of suppose that a net-zero commitment or a climate, uh, objective will solve the development, uh, problems, there's panoply of development problems. I think it's a, yeah, it's the silver bullet, um, it's the silver bullet myth that if you, if you just focus the, the challenge on the goal, uh, then sort of everybody will fall into line and, and the development challenges will, will be resolved.
Catherine L. Mann (01:02:24):
And the, and the analogy that I, that I put out there is, um, back in the late 1990s, uh, everybody in the development space, um, was looking at, uh, digitalization as this, as the gold, as the gold star, um, is a silver bullet for development. If only we could, if we had devel- uh, digitalization, um, w- widely taken on as the objective of countries of all, of all sorts, that that would solve the development challenge, that would be the secret of, of, of achieving a, a poverty reduction and, um, increase living standards. It was a silver bullet, silver bullets are, you know, uh, if you only have one of them, you, you still can't get all of the, hit all your targets. And , and as I say, the development challenges, a very wide set of targets. And so I, I'm a little concerned that somehow now, uh, net-zero is going to be the silver bullet for, for economic development.
Catherine L. Mann (01:03:27):
And so I, I, um, I, I caution, I caution that, um, we cannot, uh, kind of, um, uh, collect up all the development challenges and ascribe to them. Well, if we, if we just put net-zero out there as the target that that's not how all of these problems will be solved. So I, I, I, that's a caution. Um, as I said it based on the last time we did this which was, you know, digitalization was gonna be, was gonna be the, uh, answer to all of our, our development challenges. The second, uh, point that, that I want to make is with regard to the question is explicitly about, well, just solve China and India, uh, US and India and they will solve the problem of, of climate, uh, climate change. Um, two things about that. One is, uh, the rest of the world is gonna be, end up recurring faster.
Catherine L. Mann (01:04:15):
You know, it's, it's not just India that has a demographic, uh, profile is very different from the advanced countries, including, you know, obviously the United States but many other countries as well. And, um, ultimately we want to ensure that, um, it's not just, uh, on the shoulders of, of two countries to achieve an objective which is one that has a global, uh, global reach, the second, um, the second variation or, or, uh, uh, part of that is that the solutions and the strategies that are most effective to achieve the objectives of, uh, decarbonization are gonna be quite different depending on what the initial conditions are and what the nature of, of an economies, uh, when an economy is.
Catherine L. Mann (01:05:01):
So you kind of don't wanna have all the push for innovation and, and push for adaptation and mitigation to have only the framework of a big advanced country and a big, uh, developing country. You, you wanna put into place a framework that will allow for innovation, adaptation and mitigation to be, um, pushed forward by a range, uh, of both pu- public and private entities, um, uh, that repre- you know, uh, is, is reflective of the differences, uh, in initial conditions and, and exposures of the economies. The variation is good when we think about, uh, incentivizing the private sector to look for opportunities.
Elida Reci (01:05:46):
Thank you, thank you so much Catherine. Um, the points are well taken, you as a governance person, I would say that, um, hearing, um, having some emphasize on the multifaceted challenges of development is critical, um, and your comparative analysis of digitalization technology fusion with other net-zero is spot on. Thank you. Um, ye-
Amar Bhattacharya (01:06:09):
Um, Elida could I just, uh, one minute because I don't want to leave a false impression here. So the idea is net-zero is the North star for climate action but that doesn't stop there. The idea is to link climate action to development in a very very integral way and to identify the development opportunities that will lead to the net-zero.
Elida Reci (01:06:37):
Mm-hmm (affirmative).
Amar Bhattacharya (01:06:37):
And the case of India that I mentioned as an example, it is about the energy transition, it is about the water transition, it is about food and land use, it's about sustainable transport. The question is how can you deliver those development opportunities that also produced a net-zero outcome? And there is tremendous synergy, you know, the OECD report on investing in, in grow- uh, climate investing in growth made that point. We made that point in the new climate economy. So the idea is really how do we bring together as Navid had said, uh, you know, and the secretary general is emphasizing the climate opportunity with the development opportunity.
Elida Reci (01:07:23):
Thank you. We appreciate.
Catherine L. Mann (01:07:25):
The OECD repo- the OECD report was under by chief economist (laughing) [crosstalk 01:07:28]. Thank you for the call out.
Elida Reci (01:07:30):
The UN's new report Catherine just came out in December-
Navid Hanif (01:07:35):
Yeah.
Elida Reci (01:07:35):
... and it adresses but, um, um, Navid, yes, please.
Navid Hanif (01:07:39):
I just, I think, uh, it has been kept, I just want to give you two points. One when they were negotiating the UN climate framework convention after Rio, this was a debate which was raised there also. What we are, we're not saying climate change will solve development. We are seeing approach climate change as a development issue. If you just want to make it green and reduce emissions, what about poverty? What about inequality? You might accentuate them. So that's the point which was at the time of negotiations of the convention, also framework convention. The second point is, and this is a voice which is becoming very loud when you get into these conversations which we haven't defined. If the transition is not just, the large chunk of humanity will be pushed into even worse conditions but they are in right now. So we cannot ignore these factors, greening and reducing emissions are not the solutions. Look at the big picture and develo- I wish there was a silver bullet for development. I would have distributed all over the world. There is none. It has to be homespun but supported by global actions. Thank you.
Elida Reci (01:08:53):
Thank you Navid, thank you so much. We have quite an interesting question for Catherine. Um, you suggested we need policy certainty. In Northeastern States, we have seen New York, Massachusetts, Rhode Island. Their goal is to hit climate goals 2050. Is that a good model? That could be the case, case up to national levels and spread around the world. And would that create the type of certainty the private sector is looking for?
Catherine L. Mann (01:09:27):
So there are a number of different examples of, uh, groups of states, countries that have, um, agreed to work collectively towards a climate goal. The Northeast, uh, is one of them. There's also, uh, on the West coast, uh, into Canada, there's a, another grouping. And of course, if we wanna think about groupings, we could talk about the, um, the, uh, climate cap-and-trade system over in Europe. Uh, they kind of have one too and they've had one for quite a while. Um, the, the challenge of course is, a couple challenges, first is, um, does the system that has been negotiated, uh, between the, uh, authorities, it, whether they be States or countries, does that system, um, how, how dependent is it on the existing, uh, uh, political relationships and, uh, inst- sort of characteristics of production, you know. Um, uh, something that might come out of Texas, uh, might look very different than something that was, was negotiated out of, um, you know, the, someplace that has a lot of, uh, wind, uh, or, or sea power, you know, sea, sea change, um, for energy.
Catherine L. Mann (01:10:47):
So I think there's, uh, can it be scaled up? I think it is an example. I think these are examples of how in, uh, authorities have tried to work together with, uh, common interests, um, and, uh, whether or not you can start with that as a nucleus and then say, "Okay, can I get my neighbors to join in? Oh, well, if I can get my neighbors to join in, well, can I get the next group to join in?" Um, that is a, you know, that's, that's one strategy, you start small and you go out. The other strategy is, is to try to say, "Can we, can we come up with a, a global and, uh, a global key, uh, price that will, um, that will, uh, incentivize, uh, authorities to, to come to, authorities and their private sector, um, companies to come to a new approach to, to climate.
Catherine L. Mann (01:11:42):
And again I, I really do come back to carbon tax. Um, and, you know, I think an interesting question, if we, if we say we don't have a carbon tax, what about the carbon border adjustment mechanism? The so-called Porter tax for carbon to, uh, for those who have come up with a strategy internally to try to incentivize companies to reduce their carbon footprint, um, do you, do you increase the likelihood that you can move this out in terms of sequential, uh, co- concentric circles. If you have a carbon border tax, uh, that, uh, reduces leakage then you are also incentivizing to get inside the circle if the inside the circle market is big enough. So, you know, is that, I know that's a very kind of the carbon Porter adjustment mechanism that is a controversial one, there're a number of issues, uh, having to do with the WTO and production methods and so forth but, you know, kind of, uh, an interesting thing to think about.
Elida Reci (01:12:44):
Thank you so much, Catherine. Um, you kind of proceeded the question that is for Amar regarding the carbon pricing. Um, Amar carbon pricing is emerging as a key unknown in climate finance. Um, do you think our political systems are likely to get carbon taxes right? And what if they can't, are there other alternatives?
Amar Bhattacharya (01:13:10):
Um, you know, I'm an advisor to the co-chairs of the Coalition of Finance Ministers on Climate Action and carbon pricing has been an intense issue of discussion in that coalition. And even though that is a coalition of, for climate action, you know, carbon pricing is still a difficult issue because of the political economy iss- uh, aspects. And as Catherine me- mentioned, you know, you know, we can't really have fragmented, you know, responses because you do need a, you know, it's, it's a global externality and you really do need a global response. Um, so I think, uh, the prospects of movement on carbon pricing have improved but the methods by which we will get there will vary a great deal. Second, we will not get there at the pace and with the level that is needed. Everybody, you know, if you look at the Stern Stiglitz High-Level Commission on Carbon Pricing, you know, they recommend a carbon pricing, you know, of $100 per tonne in the second half of this decade. And now people think it should be even higher. Only a few countries are on path to get there.
Amar Bhattacharya (01:14:25):
So that's, that means, again, as Navid said, you know, we can't really think of it as the only instrument and indeed it shouldn't be because there are other aspects of policy that can be quite powerful and serve in some sense, you know, in- interlocking objectives. So regular pre-policies will play a very important role. Standards will play a very important role in terms of changes of behavior. Um, fiscal policy will play a very important role in terms of the aspects of, uh, incentives and direction. And don't forget that public investment is still the dominant way of influencing sustainable infrastructure. It's this, this, the it's the decisions that the public sector still makes that have a profound impact. So we really need to look at this as a package but what is key is to set expectations and the direction of travel. That's the way in which the private sector will come behind, that's the way in which innovation will happen. So I do think carbon pricing is absolutely critical but we should not be stuck with it as the only thing of waiting for order to arrive somehow magically solve the-
Catherine L. Mann (01:15:48):
Mm-hmm (affirmative).
Amar Bhattacharya (01:15:48):
... problem we have at hand.
Elida Reci (01:15:52):
Thank you Amar, thank you very much. Um, any other panelists would like to have an intervention, um, then, uh, with your permission, I will go to the closing question and ask each of you to spend two to three minutes. Um, John Kerry the US Presidential Envoy for Climate called the Glasgow COP26 Summit the world's last best chance to get real. What are the key challenges for climate finance five years into the Paris Agreement? Shall we feel optimistic about outcomes? Um, Catherine, shall we start with you?
Catherine L. Mann (01:16:32):
Um, I guess I'm gonna be optimistic. And the reason why I'm optimistic is because I do think that there is a tremendous amount of, uh, private financial capital that, uh, wants to meet the demands of con- uh, of companies who want to meet the demands of their investors and their, uh, shareholders and the consumers of their products and services. So, um, if we think about, uh, the demand for, uh, recognition of the climate goals, uh, you, if you're a company and if you're financing a company, you're looking at who, you know, is there enough demand for the transparency and disclosure about, uh, the climate, my climate footprint? Yes, I think there is. Uh, there's challenges of getting there but consumers really wanna know, um, investors want to finance it, shareholders care a lot, uh, increasingly so and it really has been an inflection, uh, to, uh, focus on, uh, climate oriented financial strategies.
Catherine L. Mann (01:17:50):
Th- yes, they're gonna make money off, on it, you know, I mean, that, that is what, you know, that is what companies do. That they wanna make a profit off, off of this new, uh, this new demand. And financial institutions and those who finance it also wanna make a profit off of this new, um, new demand. So, uh, I, I think that what has happened is that there with a greater recognition of, um, climate change as being a, a, a existential threat. Um, you do have this d- this greater demand for the types of, um, capital allocation strategies that will get us to the goal line. So I am optimistic that there is enough money out there. I do believe that there's, there's a lot of money out there. Uh, I do believe there's a, there's a lot of money out there.
Catherine L. Mann (01:18:37):
I do believe that there is private sector in, uh, demand for financing it and for, uh, you know, uh, producing products and services that with a lower carbon footprint. Um, in some sense I want, uh, so I think what we're seeing here is private sector leadership which in the end you, you do need. Um, I want, I, I'm really hoping that COP26 will come up with, um, a recognition on the part of the public sector of how they can play a, more of a supportive role. Now, I know this is gonna sound weird because the pri- you know, pr- private sector leadership, um, is only gonna happen if the public sector agrees to solve the externality one way or another through co- you know, second best mechanisms or whatever I read doesn't have to be only a carbon tax.
Catherine L. Mann (01:19:25):
But if the public sector can create a common approach there, the private sector will then take the leadership in, in, uh, trying to, in, in trying to get us to the carbon, carbon goal. So you gotta have the private sector money, you gotta have them take the lead on decarbonization of products and, and, and balance sheets. Um, the public sector has to create the environment that gives them a clear signal to do that. Uh, and I'm hoping that COP26 because it is, you know, it's good, brings everybody together. That, uh, COP26 will create a, uh, momentum on the government side, uh, policymaker side to create this more certain environment into which the private sector can deploy the resources.
Elida Reci (01:20:10):
Thank you Catherine. Navid?
Navid Hanif (01:20:16):
Um, Elida, we have no option but to remain optimistic. So that's the way we should approach this question. We have, and this, you just quoted the secretary general's report. We have repeatedly conveyed that if you do not take climate change into your decision-making as in private entity or a public organization, you are risking your own future. And Mark Ames has been unambiguously clear about this in his book and his, uh, number of articles. That companies who do not respond to the climate change crisis are risking their own future. So there is no choice but to follow that and do few solid things. And I want to flag three, first, social externalities cannot be ignored. So the Glasgow Summit will also have to bring in of course, environmental externality but social externalities which the large chunk of humanity will confront if we do not address climate change.
Navid Hanif (01:21:22):
And yes, big emitters have responsibilities to bring in the public sector funding that was promised. That's the number two point. $100 billion were promised from all sources, that commitment has not been met. It's a global agreement which should be honored. And that is also a way of encouraging governments to put in place policy frameworks which brings both public and private source, resources to their countries to invest in these climate mitigation, adaptation technologies. And the third, and that's where we see we can have a breakthrough. They're calling on each other to create conditions may not take us very far. So we have to create space for that bargain that we, the SDG has been advocating for a long time, that public and private sector will come together to advance these decisions of financing, uh, financing development in a way that it's not working cross purposes. For instance, we are still seeing massive investment going into fossil fuels. At the same time, growing demand for renewables. So we also need to strike a balance there and push this transition to public and private actions jointly. Thank you so much.
Elida Reci (01:22:54):
Thank you very much Navid. Amar?
Amar Bhattacharya (01:22:58):
Um, I agree with everything that Navid said. Um, and what, you know, the points that Catherine had made. Uh, I just think that, you know, we have to recognize that we are, we are in a moment where we have to tackle several crises simultaneously. The pandemic and the climate being of course, two. But also the challenges around inequality, the challenge of a weakening global economy before the crisis. Uh, you know, uh, and the development challenges that lie ahead. And, uh, there's nothing, uh, like a wasting crisis so this year has to be the time to come together decisively, purposefully and strike the grand bargain that we have all been talking about. But in that there are two things that I think are particularly important. One is the $100 billion that, uh, Navid mentioned because it is a symbol of trust. You know, if we don't deliver on that, you know, I think it will keep this develop- developing divide going and that develop- developing divide is, is really, you know, fundamental to tackling climate action.
Amar Bhattacharya (01:24:12):
The second is we need a pragmatic road forward around the issues of a coordinated investment program in all that is concerted. We needed it around the policy elements that we have all been talking about and we need it around finance. And defining it pragmatic program, I think is what has to be the challenge of, uh, of 2021. And it's not just COP26, it's actually the series of things building up to COP26 starting with the G20, G7 and Carbis Bay in early June with the Venice Summit on finance of the G20. The very centrally, the, the UN Summit in September will be crucial in laying the groundwork and the G20 in November. So we should see all of these as reinforcing and really producing a grand bargain that can deliver on climate, on development and getting us out of the pandemic.
Elida Reci (01:25:21):
Thank you very much Amar. Um, I, I will take that opportunity and thank you all, uh, for very very available presentation and comments and insight that you shared with all of us. Um, I would like to thank the audience that, um, followed us for about more than one hour now, you know. Um, and, um, I've shared, uh, quite a lot of interests, um, either by attendance or by posing the questions. And I would like to thank Brandeis host. For me has been home since the moment I stepped in, in 1997. Um, and, um, thanks to, um, uh, founding dean Peter and the current dean, um, Dean Graddy and to many of the professor, Professor Ben Gomes-Casseres who started to work on climate change when it wasn't that much in the forefront of the word.
Elida Reci (01:26:17):
Um, it has been, uh, wonderful, um, uh, to have been part of this and moderate this, uh, panel with distinguished panel and be home again. Um, uh, thank you Brandeis, thank you for always keeping us connected and for, for always tackling, uh, the most important issues in global affairs. Thank you. Thank you very much to all of you, Catherine, Amar, uh, Navid, uh, Peter and everyone else that has been involved. Barbara and Gabe without you, and Patrick without you would not have been possible. Thank you.
Navid Hanif (01:26:55):
Thank you for skillfully moderating Elida. Excellent job.