As the world prepares for COP28 in Dubai later this year, the focus is shifting from mere discussions about climate change to actionable strategies that mobilize private capital for sustainable development and climate resilience. With climate change affecting nations worldwide, unlocking private-sector resources has become an urgent priority.
Currently, many investors view climate-centric investments as synonymous with “social impact” and lower profitability. While sophisticated investors have successfully allocated funds toward decarbonization and energy transition sectors, these investments are often illiquid and inaccessible to the average investor.
To bridge this gap, there is a pressing need to create climate investments that are profitable, liquid, and accessible to all. COP28 presents a unique opportunity to rethink our approach to delivering market solutions and leveraging digital innovation to scale promising models.
Mobilizing capital at scale requires tapping into the global savings of individual investors, pension funds, insurers, and sovereign wealth funds. Risk diversification can be achieved through retail-friendly, liquid instruments such as exchange-traded funds (ETFs), making climate finance more accessible.
A profitable, long-term, climate-aligned investment strategy should involve a diversified portfolio of assets that directly or indirectly support climate financing. For investors with a long-term horizon, such a portfolio could comprise three main asset types.
The first is climate-resilient real estate and infrastructure—assets located in stable geographies with low climate exposure. Valuations in these regions are expected to appreciate significantly due to population shifts from high-risk areas in the Southern Hemisphere to more resilient communities in North America, Northern Eurasia, and select regions in the Global South.
By focusing on these strategies, investors can not only achieve profitable returns but also contribute to global efforts in combating climate change. Making climate finance profitable and accessible is essential for channeling the vast pool of private capital toward a sustainable future.
As we approach COP28, it’s imperative to move beyond “greenwishing” and “greenwashing” and implement practical financial instruments that incentivize private investment in climate resilience. Only by making climate investments appealing and accessible can we unlock the necessary capital to address the pressing challenges of climate change.
Reference(s):
cgtn.com
