Sir Andrew Steer on Catalyzing Climate Finance — Net Zero Delivery Summit

On June 23, The Global City hosted its Net Zero Delivery Summit during London’s Climate Action Week. VerdeXchange News excerpts a speech from keynote speaker Sir Andrew Steer, as he emphasizes the new economics of climate change. Steer addresses the role of the private sector in climate action, the importance of transition finance as industries change, and the importance of overcoming differences to find effective solutions that bring people in. VerdeXchange News has previously covered climate change policy in the U.K. in past talks with John Ashton.

“If we don't have that feeling of fear and dread, we won't have the motivation. If we don't have that feeling of hope and possibility, we actually won't get up in the morning to do what we need to do.” -Sir Andrew Steer

Sir Andrew Steer: This month, I was in Rio de Janeiro for the Earth Summit, where heads of state walked across a red carpet and signed the Framework Convention on Climate Change and the Convention on Biological Diversity. At that time, even though it had been difficult to get there, there was a feeling of an incredible moral imperative, and we haven't always honored that. There have been times when we have [in] Kyoto, Paris, certainly Glasgow in 21’, but we don't always feel that sense now, but we need to recover it now. Since Rio, we've had huge changes in the way we think about climate. Originally, it was very much an environmental issue. Now it's an economic issue and increasingly a human development issue. 

Back then, we thought the solution was public sector, public money. We now know that, given the numbers we've just heard about, we need the private sector to play the biggest role, and the public sector needs to help the private sector deliver, so that's why this meeting is incredibly important, and why the city of London and the United Kingdom must play a major role. It's so exciting to see what is happening. 

As we just heard…we live in a good news, bad news—world. If you get 100 experts on climate change, and you say, “How are you feeling?” roughly half of them will say, “It's amazing.” 

Did you know that when Jimmy Carter put solar panels on the roof of the White House in 1979 and since then, those panels have come down in price by 99.7%? Did you know that the price of battery storage has fallen by what, 90% in the last 15 years? Did you know? ….And they'll give a whole set of amazing things, then the other half will say we're lemmings. We're going over the cliff. We're seeing 1.5 in the rear-view mirror, and we are on our way to a disaster.

Now they can't both be right, can they? 

Well, yes. The challenge for us is to hold these two seemingly inconsistent truths together. If we don't have that feeling of fear and dread, we won't have the motivation. If we don't have that feeling of hope and possibility, we actually won't get up in the morning to do what we need to do. I'd like to simply raise a few questions that I think will be necessary to answer if we're to be successful. Because, of course, the finance issue is not that there's not enough money out there. There's plenty of money out there. It just isn't going to the right thing quickly enough. 

Our job is simply to invest based on risk and return. We're neutral because the financial sector hasn't been so neutralized, and is actually risk-averse. They like doing things they've done before. The financial sector has high discount rates often therefore, they don't want to take the upfront investment that is required. Some incredibly exciting things are going on here, I believe. 

Question number one: Will we understand the new economics of climate change? 

Back in Rio, there was a legitimate view. It was a trade-off: While nice to address climate change, it's going to hurt your economy, add to costs, and probably lower your competitiveness. 

Then, we had a report 18 years ago, which made it make sense, because even though there are costs today, there are benefits in the future that are great. We now have a new economics of climate change, which says, actually, if you take bold and smart actions on climate change, you'll have economic efficiency. You will drive new technologies, lower risks, and reshape expectations about the future. Those four things combined add to a dynamism that actually leads to more investment, and actually, Nick Stern is bringing out a new book in a couple of months, basically all about what he calls climate change as the growth story of the 21st Century. 

Now that sounds wonderful and rosy, but it's very important to remember, whilst strong action on climate change is good for a country, good for a society, good for the world, it's not good for everybody, certainly in the short term. There are losers and winners, and those include people and families who lose their jobs. Good economics doesn't mean the finance will also work, and we need to understand the new economics of climate change. 

So, the second question is: Will we get serious about learning what the private sector really needs to play the role we need? 

That's why the transition finance market review and the new Transition Finance Council, which I know the city of London’s government is setting up, and it’s so important because it's forensic, it's detailed, and it says, This is what we need on policy, and this is what we need on de risking and so on. 

Last week, I was in Copenhagen, where we convened 40 finance ministries from around the world who wanted to know how to build capacity so they could play the right role, encouraging their private sectors and investors. It was so exciting to hear from all around the world, and the ministries of finance are taking it seriously. There are exciting examples out there…There are no silver bullets. It's a jigsaw puzzle, and needs to be put down very carefully. 

Question number three: Will we get beyond our disagreements? We in the environmental movement…focused too much over the last 50 years on what we're against and not so good about what we're for, and understandably, because originally, the environmental problem was stopping pollution and stopping bad things happening.

But the only way we're going to solve things is by doing more good things, and that requires a shift in approach. 

Take carbon markets, for example. We've been faffing around for far too long about: are you for it? Are you against it? We now have a mechanism. We have ways of understanding all of the problems that were created over the last 20 years in carbon markets. We actually can solve them. We need to get on and do it. We in the environmental movement, and actually in the government movement, have been so keen to consult to put regulations on. 

There's an important new book you may have read in the United States, called Abundance, by Ezra Klein, and what it basically has is this wonderful example. California, for three decades, has been trying to build a high-speed train line from San Francisco to Los Angeles, and the current governor has basically said, can't be done. Just too much bureaucracy, too many requirements. During that time, when in California, we couldn't build a 500-kilometer high-speed line, China built 23,000 kilometers of high-speed line. We don't want to be China, but we sure would like some high-speed rail, wouldn't we?

Question number four: Will we bring people into the picture? 

We in the environmental movement have too often assumed that simply good policy in capital cities or in the United States, what's called the the coastal elites will work, but we've forgotten the fact that the transition we're talking about will lead to job losses, lead to massive job gains, but not necessarily for the same people, and everybody will have to do things differently in their workplace. We need to put that absolutely at the center, and countries are learning that. Recently, I was in South Africa, where they closed the Komati Power Station very bravely, but they did it before they thought about what would happen to the workers. So massive opposition. Now, they're investing hugely in the retraining program. They've slowed down their closures to give time to do that. 

Question number five: Will we understand the present period? 

For what it is, progress is never linear, and it is a bit discouraging…Remember, in Glasgow, there was $140 trillion of assets under management were committed to net zero. I mean, my goodness me, we thought we'd nailed it. 

Now, we’re seeing this huge erosion, but actually…in most financial institutions that made commitments, they're doing it. Most corporations are still doing it but not, quite frankly, as much as they need to. But progress is never linear. The election in the United States changed a lot of things, but it didn't change the law of physics or economics, and that, of course, is why we're here today. 

Finally…Will we have leadership that thinks big enough? 

There are thousands of great examples going well around the world. But they are not enough. We need leaders in the corporate sector, the financial sector and the political sector, and the NGO sector who think really big. For the last four years, I've been running the Bezos Earth Fund, which is a $10 billion grant facility in climate and nature. We spent a lot of time thinking about what it would take, and we propose something called a deal team for the planet, because if you go to the World Bank or anywhere, yes, they're working with the private sector, they're not really soulmates. And what we need is soul maintenance. By the way, there's nowhere in the world better equipped to do it than here in the City of London. 

And finally, a story. A few years ago, my family and I went to Kenya to watch the wildebeest migration, the 1.5 million wildebeests walking across the Serengeti and the Maasai Mara. It's incredible. We were watching them as they were crossing the Mara River. These wildebeests were going down this incredibly steep slope, and kids were getting lost. Crocodiles were eating them. It was just absolute chaos. 

My 13-year-old daughter said, “Why are they doing that?” When we actually saw two miles down the road, we saw actually flat water will be crossing, and there were no crocodiles. Why do they do it here, where it's so dangerous?

I asked a lot of experts why that is true, and they said, “we don't know, but what we think it’s because they've always done it that way. It's in their DNA.” That is branded onto their brain, that's where they crossed the river. It got me thinking, why do we do certain things? Why do we run our economy a certain way? Why do we tax good things like work and not tax bad things like pollution? 

It’s because we've always done it that way, and we need to change that.

The Net Zero Delivery Summit has concluded, but you can watch all sessions now on demand (including Sir Andrew Steer).