ACS 2023: Asset owners urged to embrace green investments in earnest by ‘unlocking’ trillions

Asset owners across the world, particularly in developed markets like the U.S., UK, Europe, Japan and Australia, are sitting idly on trillions of dollars that could be used to firepower the green finance ecosystem, according to climate finance specialists at a private investment event ahead of the high-profile Africa Climate Summit in Nairobi, Kenya.

Without asset owners no net zero pathway, without investment no climate solutions, was the message from multiple speakers at the GCF Private Investment for Climate Conference, organised by the Green Climate Fund.

Taking to the stage, Mafalda Duarte, the relatively new executive director of the Green Finance Fund, told an audience of investors, managers, policymakers, NGOs, entrepreneurs and bankers at Nairobi's Movenpick hotel that "investors need to do much more.”

The GCF was created by the UN Framework Convention on Climate Change in 2010 and is currently looking to attract new investors to scale up its efforts.

“Trillions of dollars are simply locked” in pension funds and sovereign wealth funds around the world, Duarte stated.

"The political will is there, but private investors don’t see returns in villages,” she said. As a result, missed opportunities are piling up.

Particularly in infrastructure, investors could do so much more, especially since the commercial proposition is attractive so there is a role of policymakers, authorities and other involved actors to make investors see the light, she argued. 

“Infrastructure is where [investors] should be, there is a huge demand. And obviously energy," Duarte said.

"Investors, developers, they can see the potential in these markets, but we need to address barriers and challenges.”

Removing investors’ reluctance to invest in relatively unpredictable developing markets and see the potential in pure climate solutions are two main obstacles that need to be addressed.

That was also largely the message of Alexia Latortue, assistant secretary for International Trade and Development at U.S. Department of the Treasury.

Speaking on behalf of the Biden administration, Latortue told delegates it is vital to “mobilize private finance”.

There is no point pressuring or forcing asset owners she said. Instead, they should see the added value of embracing climate finance by encouraging “private institutions to go hand in hand with public institutions," which would allow investors to more easily find their way into developing countries.

“We need to mobilise private capital quickly, and efficiently. That is the essential challenge.”

Latortue said that “$350 trillion, give or take” from pension funds, institutional investors, insurance firms and other asset owners around the world could be opened up in the runup to 2050 if “we get it right.”

“We need to mainstream investments and give investors the tools they need to make this happen.”

She stressed that “we as contributors will never understand the priorities of asset owners as well as they do.”

Latortue singled out the Blue Green Bank in Barbados, which is working to bring investors and public bodies together.

Launched during the World Economic Forum in January, the bank has pulled in funds from banks, insurance firms, pension schemes and others to finance climate-related projects both domestically as well as across the region, Latortue said.

"Designed to unlock and unleash outsized private sector impacts on global development challenges, it's the first-of-its kind private sector partnership fund dedicated to launching partnerships that leverage business capabilities and influence commercial operations to advance development objectives."

She said: “We need more of these companies,” she said. “We have to teach others to do the same, that creates stable finance flows.”

“Opening up private investment flows is an absolutely priority for the United States,” Latortue concluded. “Don’t underestimate the enthusiasm we have for this, so I would like to challenge everybody in this, open up private investments, and challenge all players quickly.”

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