Finance Unfolded

From disaster relief to future-proofing the world’s most vulnerable communities, climate change comes at a considerable cost. Regions around the world are preparing for a worst-case climate scenario, but not all countries have the funds to protect themselves from increased droughts, floods and sea-level rise. 

The UN Environmental Programme (UNEP) estimates that developing countries will likely pay between $140 billion to $300 billion per year by 2030 on adaptation projects. These costs will nearly double by 2050 but investing in a low-carbon economy could yield a direct economic gain of $26 trillion through 2030.

The barriers facing a carbon-neutral transition include high transaction costs, uncertainty in national and international frameworks, and the fact that 1.5°C-compatible solutions require long-term investments. But policymakers and investors recognise its importance and are increasingly committed to making progress towards this vision. 

Financial capital is one of the most powerful levers for influencing the behaviour of systems and plays a critical role in building a low-carbon, climate-resilient, just, and inclusive future for all. The United Nations has outlined top-down and bottom-up approaches to radically shift our financial system in order to mitigate risk and incentivise investments in green technology.

Finance meets innovation

Climate-KIC’s Decision Metrics and Finance theme focuses on developing and integrating novel metrics, finance and decision-making mechanisms that accelerate and scale up climate action. This underpins all economic sectors, from cities, agriculture and manufacturing to real estate and energy.

1. EIT Climate-KIC’s City Finance Lab is working to engage cities and municipal finance stakeholders, through tailored support from international climate finance experts, to develop finance that is longer-term, more attuned to emerging risks and more efficient at delivering returns for the economy and wider society. The City Finance Lab is working to leverage $500 million over the next five years in additional finance for climate action in cities.

2. EIT Climate-KIC launched its debut start-up investment programme in conjunction with crowdfunding platform Seedrs in April 2021. The Found by us, funded by you programme gives private investors early access to a rolling pipeline of interesting environmentally driven start-ups from across Europe.

3. EIT Climate-KIC’s Transformation Capital Initiative (TCI) is building a pipeline of investment opportunities at the multi-billion-dollar scale. It has an open-ended, multi-stakeholder, and action-oriented structure and borrows methods from human-centred design and systems thinking to build a space for collaborative research, prototyping, and investing. It will act as a vehicle for the sustainable finance community, putting a wide range of theories and innovations into practice.

Taking action

When it comes to taking personal action, citizens have more purchasing power than they think. Making simple lifestyle changes can help reallocate your spending to support a more sustainable planet. The United Nations Environment Programme (UNEP) advises the following:

1. Use your consumer power where you shop, eat and work to voice the change you want to see and reduce disposability from our lives!

2. If you have a retirement fund, you could be inadvertently investing in unsustainable industries. If so, ask your fund manager to move to a more responsible fund.

3. Decide on your priority social and environmental issues and invest accordingly.

4. Ask your bank about their sustainable investment policy and if they don’t have one then swap banks if you can.