2017 Winner! Seva Karpauskaite: The international green financing structure is the catalyst we need


My name is Seva Karpauskaite. I am a graduate student of Energy, Resources and Environment at SAIS, Johns Hopkins University. Living in Washington, DC, a global energy capital, I am surrounded by a global energy debate that is especially heated nowadays. That is why a challenge to focus on longer term, coming from Masdar, based in another energy capital, Abu Dhabi, is appealing: what key development would place us firmly on the path to a low carbon #WorldIn2026?

Let us look at the state of clean technologies. While skeptics wonder whether it is technically possible to satisfy the growing energy demand with sustainable energy sources, experts ranging from the World Wildlife Fund to International Energy Agency and beyond, already provide feasible projections. On one condition, though; we have to unlock the financing potential that will enable an accelerated development and deployment of existing and new green technologies and implementation strategies. The international green financing structure is the catalyst we need. Just like building anything new, the transformation of our energy infrastructure to create a low-carbon economy is costly. The World Economic Forum estimates that we need around US$70 trillion in the coming 10 years to make the necessary investments in renewable technology, low-carbon transportation and low-carbon cities.

One of the most important aspects of finance is connecting people, capital and ideas to drive solutions . Ben Bernanke, who steered the US economy for 8 years as the Chair of the Fed, has called credit the lifeblood of our economies. Likewise, the development of green finance is the lifeblood of the future green economy.The easiest way to understand the role of finance is to compare its role to that of water. Water is vital for all known forms of life. Finance is vital for the functioning and growth of all parts of the economy. Water comes in diverse forms, such as freshwater, vapor, clouds and ice; and it is used for a variety of purposes, such as drinking and sustenance of life on earth, agriculture, manufacturing and diverse forms of entertainment. Similarly, financial assets or money comes in many forms, such as commodity money, paper bills and coins, electronic funds, bonds and financial derivatives. It is also used for diverse purposes; from buying and exchanging basic goods, to international trade, to fueling investment and infrastructure funding.

Utilizing technology to divert waterways and ensure access to water has taken centuries to develop and is still an issue in many places. Luckily, we were faster with financial innovation and we already have the necessary financial instruments and institutions to address sustainable development needs and spur innovation.We just need to stream much larger flows of private and public investment to meet ambitious emissions targets, support local community development, lower energy costs and advance green technology markets.

Some of the vehicles to focus on include:

  • Green financial institutions, like UK’s Green Investment Bank that acts as a catalyst for attracting finance to develop low carbon economy. In 2013, it formed an alliance with Masdar, which demonstrates a positive development towards international cooperation between institutions devoted to green finance.
  • Green bonds and other green financial assets, which range from green investments by pension funds to carbon insurance in the insurance industry.
  • International investment agreements, like Mission Innovation (MI) launched at COP21, which encourages 22 countries and the European Union to double their cleantech R&D investment over five years, coupled with Breakthrough Energy Ventures driven by private companies, that aim to match governments’ investments.
  • Financial software applications. For example, Acorns, the mobile investment platform enables commission free investing of spare change. A similar application could help develop green micro-investing, promote financial literacy and engage diverse individuals as green investors.

Another piece of good news is that there is a global abundance of private capital. Pension funds alone have $28 trillion in assets.

So we have the ideas, feasibility studies, models and capital to transition to a green economy. The influx of private and public capital is the lifeblood for meeting this challenge. What is needed now is decisive leadership from global policy makers, such as those here in Washington DC and those meeting in Abu Dhabi to prioritize the development of a global green finance system and spur similar developments around the globe.

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