October 2024

Partnership was an underlying theme in every discussion last week on how to advance climate solutions and sustainable development goals. In his opening remarks, PRI CEO David Atkin emphasized one of the organization’s core principles: Cultivating collaboration among key stakeholders, including investor signatories, policymakers, and academics.

At the Sustainable Finance Policy Conference on October 8, the PRI introduced updates to its Policy Toolkit on sustainable finance policy reforms. The event, which convened policymakers, regulators, and investors, explored reforms that support sustainability goals while maintaining competitiveness and economic resilience. Discussions also focused on how to navigate political cycles to ensure long-term support for responsible investment initiatives.

Speakers from all regions – North America, Europe, Africa – advocated for a “whole of government” approach, emphasizing the need for comprehensive coordination across various government departments, agencies, and levels. Coordination ensures that all facets of policy, from environmental regulation to financial oversight, are aligned to address systemic challenges such as climate change. In resource-based economies, from Canada to South Africa, targets along the transition trajectory must include human rights; not just to address job joss, but also to crowd people into new industries.

Speakers in all regions also noted the need to work together in addressing what have become human rights trade-offs in the path to net-zero, primarily land acquisition for renewables. Speakers acknowledged that this remains a steep learning curve that must be solved through collaboration between the Global North and South alongside governments and the private sector.

Back on the ground following PRI, speakers from the electricity sector at the Smart Growth Symposium talked about the historic undertaking of doubling the electricity grid by 2050. They called for more strategic collaborations between universities, industry, and government with better linkages between ivory towers and the shop floor. 

The room took a moment to celebrate an initiative to emulate. The University of Toronto’s long-standing reputation as a global leader in AI research acted as a foundation for bringing together researchers, government entities, and private sector partners to create the Vector Institute for Artificial Intelligence in 2017. U of T’s expertise in AI, particularly through faculty members such as Nobel Prize winner Geoffrey Hinton, provided the academic credibility and leadership that helped position Toronto as a significant hub for AI innovation globally.

On the energy transition, the university recently announced funding to make its Grid Modernization and Testing Centre, a Climate Positive Energy initiative, a reality. Industry facing, this test centre will help address a market capacity gap related to technology testing and real time simulation of various grid models. 

The Global Climate Finance Accelerator is delighted to collaborate with Climate Positive Energy and Rotman School of Management on interdisciplinary research to investigate and deploy new financing strategies and tools to accelerate the energy transition.

The Global Climate Finance Accelerator convenes partnerships across business, finance, and government on strategies, policies, procedures, and tools to finance the deployment of technically viable climate solutions.

On October 9, 2024, the Government of Canada announced the advancement of the “Made-in-Canada Sustainable Investment Guidelines,” which included provisions for categorizing investments based on their contribution to the net-zero transition. It could take up to three years, however, to finalize discussions on incentives to support the development of green projects, hindering progress on incentive structures that are crucial for attracting investments into green infrastructure and projects.

The good news is that many organizations are (more quietly) soldiering on in the face of regulatory uncertainty and political backlash. As noted in an April 2024 issue of Time Magazine, BlackRock’s Larry Fink and JP Morgan’s Jamie Dimon “know that clean technologies are where the biggest growth opportunities remain.” 

Dimon is placing his bets: To directly impact the transition to a low-carbon economy and provide investment opportunities related to climate change, conservation and biodiversity, JPM Asset Management acquired Campbell Global, a forest management and timberland investing company. The acquisition gives the firm a strategic entry point into the global carbon markets, as well as investment opportunities in climate change, biodiversity, and conservation. To hedge carbon pricing risk, the firm built its own internal management strategy rather than relying on government backstops.

Interesting opportunities in the global middle market were also widely noted at PRI this year. These businesses, historically overlooked by large institutional investors, present unique investment opportunities due to their agility and potential for rapid adoption of sustainability-related technologies and initiatives. Sustainable investors can drive significant impact in the mid-market by funding companies that are ready to invest in climate-positive solutions but lack access to capital. The sector’s flexibility makes it an ideal testing ground for innovative financing mechanisms for the deployment of technically viable, but underutilized, climate solutions. 

Some of the best examples of Action came from the deep dive into the real economy at the Ontario Chamber of Commerce + Climate Positive Energy Smart Growth Symposium. Culminating with the wrap of PRI, the Symposium dug into the specific barriers companies face in decarbonizing their operations. Many of these obstacles aren’t financial. For Uber, it’s overcoming “car-based culture”, which they’re tackling through behavioural science research in Canadian and US cities. Green uber selections, which are pennies extra per person, create a significant incentive for drivers. For Purolator, it’s access to electricity to charge their e-bikes for last mile delivery in urban areas. Surprisingly, electricity access in the parking lots housing e-bike containers don’t all have access to power. In addition to advocating with utilities, Purolator is piloting alternative sources of on-site power generation.

The Symposium left this Call to Action with its attendees: “Prioritize trying things. Some will succeed, some will fail. Persevere through the hiccups.”

Check this space tomorrow for more of what we heard on the need for partnerships and collaborative action in solving these tough challenges.

The Global Climate Finance Accelerator convenes partnerships across business, finance, and government on strategies, policies, procedures, and tools to finance the deployment of technically viable climate solutions.

Although the future of capital markets will look vastly different from the past, many systems remain anchored in backward-looking frameworks. While ESG and sustainability continue to evolve, we understand which factors are material to investment decisions through the ISSB standards and regional taxonomies. The focus must now shift to addressing organizational barriers—societal constructs that hinder progress. How do we create the flexibility needed to overcome these obstacles and align capital with socially inclusive, net-zero goals? 

First, by leaning toward curiosity, not fear. There’s political theater at play, especially around anti-trust accusations and climate-cartel fears, but there’s little legal basis according to Faegre Drinker’s Tiffany R. Reeves. Most of it is noise that critics are using to stoke a different agenda. Fear-based decisions, however, can stifle progress. The net-zero transition is a massive disruption unlike anything we’ve ever seen. That does create risks, but also tremendous opportunities.

Second, by tackling legacy systems. PRI Chair Conor Kehoe provides the example of tracking an issuer’s stock price for 18 months after a change in capex allocation, essentially penalizing investments in the transition. It’s not just about diversifying asset classes and geographies, says CalSTRS’ Kirsty Jenkinson. It’s also about making lots of small bets so capital can find its winners because we can’t tell yet who the winners are going to be. To help enable these bets, regulatory bodies must create safe harbours so companies feel comfortable disclosing scenario analysis. Finally, positive lobbying (for climate and other sustainability-related outcomes) is still rare. Leaders who may genuinely want to advance climate solutions are expressing their views quietly says Climate and Nature Solutions CEO Catherine McKenna. This reticence makes it difficult for government to action their feedback compared to louder, more public views. We need an enabling policy environment to level the playing field.

Third, by framing the political rhetoric around ESG in the appropriate investment context. Pension funds have overwhelmingly long term time horizons; tune out the noise and stick to strategy. For example, Wellington Management’s Wendy Comwell believes the US Inflation Reduction Act, with its focus on job creation in waning industrial areas and tax credits that work for nuclear as much as they do for wind, is a difficult bill to repeal irrespective of election outcome.

Tune in tomorrow for more of what we heard in the Call to Action.

The Global Climate Finance Accelerator convenes partnerships across business, finance, and government on strategies, policies, procedures, and tools to finance the deployment of technically viable climate solutions.