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G20: Shifting the Trillions

Investment, finance, infrastructure and G20 negotiations face climate risk

It is estimated that US$90 trillion in infrastructure investment will be deployed globally to 2030. The infrastructure choices made in the next decade will determine whether future climate stability can be achieved and whether a significant part of this investment will become stranded as climate policy tightens in the face of increasing impacts.

Avoiding high carbon lock-in and related asset stranding risk – either due to policy or physical risks – must be a global priority. Achieving this will require an orderly transition to a resilient and low carbon economy shaped by reforms to the way financial markets operate to redirect flows of public and private investment away from high risk, high carbon infrastructure towards low risk, low carbon and resilient infrastructure options.

As the preeminent international economic venue, the G20 has a responsibility to lead on financial reforms that effectively incorporates and manages climate risk across public and private investment portfolios. As such the G20 meeting in Istanbul in November is a key moment on the road to delivering these financial reforms.

What can we expect from the G20?

E3G is of the view that the G20 can help manage the global low carbon transition in an orderly manner and preserve the foundations for prosperity and security by:

  • developing cutting edge financial regulation to manage climate and related environmental and social risk;
  • driving forward smart and resilient infrastructure investment;
  • creating deep decarbonisation pathways; and
  • incorporating the outcomes of the Paris Agreement.

It will not be feasible for the G20 to agree all these outcomes in November. But it's feasible to expect a clear direction of travel to be set at November’s meeting in Antalya through two key outcomes.

Outome 1: Making energy efficiency a public infrastructure investment priority

The G20 needs to deliver a clear commitment by governments to increased ambition and action on energy efficiency investment. Half of the energy infrastructure investment between now and 2040 needs to be in energy efficiency if we are to deliver climate stability. That will require an eightfold increase in investment from where we are now. E3G has convened a statement calling for G20 countries to commit to three changes to unlock this investment:

  • To treat energy efficiency as a public infrastructure priority;
  • To commit to undertake an assessment of the structural reforms needed to address financing barriers and grow markets to improve energy productivity. This would enable the G20 Energy Efficiency Action Plan to be implemented in a way best suited to each G20 economy.
  • To commit to delivering sufficient public funding to ensure equal access to finance among householders and to leverage the large scale private finance need to repair and enhance building infrastructure.

This statement is supported by 35 NGOs, energy savings alliances and corporates from 18 countries.

A technical report by Frontier Economics, sets out intellectual underpinning for reclassifying energy efficiency as infrastructure.

Outcome 2: Moving forward with managing climate risk within financial regulation frameworks

The Financial Stability Board is due to report to the G20 on the risks posed to financial stability by climate change. Assuming the case for action is made by the Financial Stability Board, governments need to move forward with action. This could take the form of Governments defining a work programme, initially around climate risk stress-testing and disclosure, with a specific 2016 timetable focused on advancing forthcoming recommendations of the Financial Stability Board to the G20. Legislation should then be forthcoming by the end of 2016.