Mobilising capital to accelerate net zero

Saif Malik CEO, UK and Regional Head, Client Coverage, UK & Türkiye

13 Oct 2023

The race to reduce carbon emissions to zero by 2050 is an ambitious but increasingly critical target

What’s the right balance between growth and sustainability goals? Will enough private capital come to the table? Should governments absorb the greatest financing risks? Which countries are on track? 

I recently had the opportunity to debate such critical questions with leaders from both the private and public sector at Bloomberg’s New Economy Forum Gateway Europe event.

According to analysts at Bloomberg, such targets will be unattainable if renewable-energy development doesn’t get at least four times as much investment as fossil fuels over the next decade. This signals a need for both immediate funding today, as well as longer-term transition finance for the future.   

As we look ahead, we also need to consider the climate change realities that are already here, particularly in emerging markets. Our report on the Adaptation Economy notes that, on average, every dollar spent on adaptation this decade would generate a 12-dollar economic benefit. On the flip side, failure to invest a minimum of USD30.4 billion this decade could lead to USD376.6 billion in damages and lost growth by the end of 2030 (in a 1.5°C warming scenario). 

Bridging the emerging markets finance gap 

Standard Chartered connects many of the world’s emerging markets. These markets are often most susceptible to the effects of climate change and face the largest gaps in financing for both adaptation and transition. They will need to invest an additional USD95 trillion – more than the world’s total annual economic output – to get to net zero by 2050. 

Our view is that a just transition in these markets – where economic growth is delivered alongside sustainability objectives – can be achieved by supporting climate goals and fulfilling the ambition of the UN’s Sustainable Development Goals. Our role is to support the development of transition plans, provide ESG advisory services that identify opportunity and accelerate progress, engage high-carbon emitting sectors to make meaningful progress, and provide finance for sustainable development projects  

To support this, we need coordinated government policy, incentivisation and structures that steer capital to sustainable development projects across infrastructure, energy, healthcare, transport and food security.  

The risk of capital deployment is relatively higher in emerging markets, which often deters private investors. Blended finance, which uses capital from public sources to increase private-sector investment and reduce the risk for the private sector, is an increasingly valuable solution to counter the risk deterrent.  

And we can already see results. In Turkey, we financed two high speed rail projects arranging a total of over EUR2.64 billion in partnership with multiple export credit agencies. The first was a high speed-rail project linking the cities of Bandirma and Osmaneli that provides lower greenhouse gas emissions associated with rail transport vis-à-vis road transport. The other was the financing for the new Ankara-Izmir high speed electric railway, promoting cleaner transport in the country.   

We’ve also supported several projects across Africa. The continent has a significant sustainable trade opportunity, which can power its social and economic development. Capturing it requires the region to improve its infrastructure through an investment of USD170 billion a year until 2025, with a financing gap that could exceed USD100 billion, according to the African Development Bank.  

We worked with Angola’s ministry of finance to help transform the capital, Luanda’s water production, purification, transmission, storage and distribution facilities. This project received USD1.1 billion through two facilities coordinated by Standard Chartered, where partners provided guarantees and credit insurance. The result of this project was an infrastructure investment that ensures safe water for two million residents of the capital, materially improving health outcomes for the residents. 

There is also a massive opportunity for clean energy to help meet the growing demand in India, currently forecast to go from 393 GW in 2021 to 817 GW in 2030. To reach its 2030 target where non-fossil fuel power sources provide half of its electricity supply and transition from a coal and fossil fuel-based economy, India needs billions worth of investment in new power projects and batteries. We advised Shell on its acquisition of 2.9GW-peak of renewable capacity in the country with the purchase of Sprng Group of companies, helping the company triple its then renewable capacity. 

These are just a few examples of where collaborative efforts around finance can have impactful outcomes that are economic, social and environmental.  

The finance industry can be transformative in achieving net zero. We need to keep working together with governments and the private sector to ensure global capital reaches sustainable development projects in the markets that need them most.