I hope you had a happy New Year.
In London, today is the first working Monday of the year; this is just a short note to welcome you to that year.
For me, 2023 was a little sobering. It became clear that climate change impacts have really started — fires, heat, floods, storms, and more. The mission we have is now to avert catastrophic climate change; and the IPCC has been very clear that the window to act is very tight.
But despite that reality, I’m actually full of hope for 2024.
For a start:
1. Capital is flowing to climate action in greater volume, at greater speed, than ever.
- Green, social and sustainable bonds are well over the $4 trillion outstanding level, and still growing. That’s just an indicator of capital flow, and yes it needs to be 10 times that level. But it’s grown to over 100 times the size it was 10 years ago! Yes, that’s right, we’ve already grown the market 100 times; we can do way more.
- The IEA says that low-emissions power in 2023 will have made up almost 90% of total investment in electricity generation. 90%! And the world’s biggest renewables investor, China, has increased clean energy investment by 185% in the past 4 years; last year was the biggest year yet.
- “Transition plans” are becoming a requirement for companies seeking support from institutional investors. In fact, the term being used everywhere is Financing “Credible” Transitions – absolutely right, as we outlined in our 2020 Financing Credible Transitions paper.
- The idea that “sustainable returns depend on a sustainable planet” is becoming a norm among institutional investors. The question asked now is how best to for a sustainable planet; that will be one of our stories for 2024.
2. Industrial and technology shifts are accelerating
- In 2023 EV sales have grown 33% on 2022. The world’s largest EV manufacturer, BYD, has gown 66% over the past year.
- And that’s really just the start for energy; this past year we’ve seen major technological breakthroughs in battery efficiency, from Toyota patenting innovations that will see EV batteries with twice the range for half the weight, to a variety of companies rolling out power grid batteries that use plentiful sodium instead of lithium and other scarce materials. The speed of change is going to increase; fossil fuel companies now have a limited shelf life.
- Green steel is becoming a thing; low-carbon concrete is available and just has to be scaled up; alternatives to fossil fuel feedstocks in the fertilizer and basic chemicals industry are on the cusp of a J curve of growth.
- I could go on for pages; but you get the idea.
3. Governments have started to act, at scale:
- In the US, the Inflation Reduction Act (IRA) is driving a new clean industrial boom.
- A whole host of EU climate initiatives (including the EU Taxonomy) are speeding up the shift to low-carbon.
- China is tackling transition; just two weeks we saw transition pathways published for Shanghai and for Hebei’s iron and steel industry (Hebei produces 12% of the world’s total).
- Japan’s $1tn Green Transformation programme is underway, with the first sovereign bond to fund it about to be issued — with tight rules that have our support. We now have 50 governments around the world issuing green and sustainable sovereign bonds to fund domestic programmes.
- Brazil’s new government has quickly curbed deforestation, and is moving to a new economic model for Amazonian States that focuses on rapid with sustainable development.
- Plus India, plus Kenya, plus Australia, plus Singapore, plus Chile, and more.
The world economy has started to turn. We now have to speed things up. That will require further shaping the world’s capital flows; and it will deliver immense opportunities.
We — you and I, and the thousands of us committed to shifting those capital flows — have a lot to do.
At Climate Bonds we will, as we have been doing for the past 10 years, working on the scaffolding for fast growth:
- Policy proposals (see our 101 Sustainable Finance Policies for 1.5°C).
- Guidance (like the taxonomy we’ve helped Singapore’s MAS develop). We call these “shopping lists for the future”.
- Market development (standards, training, education, technical assistance). And we’re scouting for resources to do more.
This year will be a year of working on how to speed things up, taking advantage of the turning already underway.
To contribute, we’re launching monthly online Town Hall meetings to discuss. Let me know if you’d like to opt-in.
It’s my friend Sony Kapoor who first argued to me that “the future has been decided; it’s now only a matter of speed”. But speed is everything if we’re to make the IPCC’s window.
Today, I have hope.
Sean
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Sean Kidney, CEO, Climate Bonds Initiative
