COP28 Highlights: Private capital’s role in climate finance
At the COP28 climate summit in Dubai, Bridgewater Associates founder Ray Dalio emphasized that private capital must see profitable returns to finance climate solutions. This sentiment was echoed by financial heavyweights, including JPMorgan Chase and Bank of America, reflecting a shift in the finance industry’s approach to green investments.
Unlike COP26’s ambitious $130 trillion commitments, bankers now stress the need for “bankable investments” that offer appropriate risk and return. Shriti Vadera of Prudential Plc noted that private capital won’t fill political or policy gaps without incentives, and Citi’s Jason Channell highlighted the lack of viable projects to deploy capital.
Dalio stressed that private capital must provide the bulk of the $5-$10 trillion needed annually to combat climate change, but emphasized the necessity of returns. This reality check follows significant losses for green investors, with the S&P Global Clean Energy Index down nearly 30% this year.
Emerging market investments pose additional risks, complicating the financial landscape. Bank of America’s Brian Moynihan cited challenges in financing such deals, while JPMorgan’s Daniel Pinto warned that stricter US capital requirements could hinder green financing.
With a record number of financial professionals at COP28, discussions are focusing on innovative financial structures, such as debt-for-nature swaps, to attract private capital. Goldman Sachs and others are exploring these strategies to support climate efforts in emerging markets.
Overall, the summit underscores the necessity of making climate finance profitable and highlights the evolving role of private capital in addressing the global climate crisis.
