Financing the fight against climate change

“The private sector has an enormous role to play. But what we need is the policymakers to unlock the policies and collaborate in order to get the money flowing.”

Episode 12 of the Take on Tomorrow podcast features Alison Rose, CEO of NatWest Group, and Andrew McDowell, Strategy& partner with PwC Luxembourg, discussing ways to fund the low-carbon transition.

The pace at which the world transitions to a lower-carbon operating model may depend as much on financial engineering as it does on electrical and industrial engineering. “The transition to net zero is one of the biggest challenges humankind has ever faced,” said Andrew McDowell, a Strategy& partner with PwC Luxembourg, in Episode 12 of our Take on Tomorrow podcast series, “Can capital help solve climate change?” McDowell continued: “Most of the physical capital stock in our economy—our buildings, our roads, our transport, our factories—are going to have to be replaced or at the very least adapted to deliver at the net-zero challenge. That’s going to involve massive investments by some estimates of about US$125 trillion dollars between now and 2050.”

However, how banks decide who gets that financing and on what terms, and how they continue to help ensure the world has enough energy to keep the lights on and the cars running, raises a number of difficult questions.
“We want to make sure that we’re helping customers transition, financing the transition, but also making sure it’s a just transition,” said NatWest Group CEO Alison Rose. “If we simply stopped lending to all oil and gas companies, as some advocate, there would not be enough energy, new technology, or support to transition to a low-carbon economy. This simple transition is critical.”

Rose stated that some difficult decisions are required. NatWest Group, for example, has decided to only work with oil and gas companies that have a credible transition plan that is in line with the 2016 Paris Agreement on climate change. “We’ve worked really hard with customers to reduce our exposure,” she explained.
However, banks cannot go it alone. Regulatory support is critical. “We see this as extremely important,” Rose argued. “The private sector plays an enormous role. But, in order to get the money flowing, policymakers must unlock the policies and collaborate.”

McDowell agreed: “Banks are private institutions, and they are not there to alone solve society’s problems. It requires strong leadership and policy direction from governments, and that, in turn, creates bankable and financeable opportunities that can deliver returns and support policy goals.”

Listen to the podcast in its entirety here.

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