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Needed: A Mid-Course Correction for the Paris Agreement


Milken Institute Senior Director dan carol manages the Institute’s Climate Resilient Infrastructure Initiative.

Published December 1, 2023


This month, world leaders are gathering in the United Arab Emirates to assess how implementation of the landmark 2015 Paris Climate Agreement is going. The news is mixed. Deployment of large-scale solar and wind projects are trending up as are sales of electric vehicles. But so, too, is global oil and gas demand, which is still being driven by economic growth.

One thing is clear though: efforts to bend back the emissions curve by 2050 are falling short. The world simply isn’t investing enough in climate projects to stay on track with the Paris carbon reduction goals. And it’s not just that we’re moving too slowly — progress is being canceled out in real time. For example, wildfires across the near-Arctic’s dense boreal forests have wiped out much of the impressive CO2 emissions cuts we have made through clean energy deployment. And all of this is creating whispers going into December’s UN climate summit (known as COP28) that we won’t meet the 2030 “mid-term” carbon reduction targets envisioned almost a decade ago.

So, let’s just say it out loud: we need to rethink how we deploy limited public funds to meet the Paris Agreement goals by developing a new framework for capital deployment over the next decade that reflects frontline realities. Instead of finger-pointing-as-usual, COP28 could be the meeting where climate efforts are refocused on adapting to the “here and now” effects of extreme weather and wildfires.

A Necessary Detour

Investing more in this way isn’t just the morally right thing to do. According to a forthcoming analysis by the Milken Institute, doing so would reduce climate-associated economic losses by nearly $2 trillion — savings that could be banked to invest in new decarbonization technologies when they are ready to scale, as well as to support initiatives that are helping developing countries manage climate effects now.

Right now, according to the insurance giant AON, extreme weather is costing $300-500 billion a year globally, which eats into public funds available for investment in everything from climate-related R&D to subsidies for helping communities to cope. Yet funding for frontline support totaled only $63 billion in 2022. And weather events are only going to become more frequent over the next three decades.

That’s why the world’s leaders who are shaping COP28 and future COPs in Brazil and beyond need to rethink the road to 2050. What would that change in priorities look like? Five thoughts spring to mind.

First, we don’t need to overhaul or even amend the Paris Agreement to make needed mid-course corrections. Article 6 provides for new mechanisms to allow for “high ambition in their mitigation and adaptation actions” through finance, technology transfer and capacity-building, as appropriate.”

At COP28, governments and NGOs should commit to a five-fold increase in spending on climate adaptation in the next decade. To bring focus to this new campaign, the UN General Assembly President Dennis Francis should call for a special session on resilience and adaptation in the summer of 2024 to cement these new commitments.

Investment recalibration makes good financial sense, because right now, save for large solar, wind and energy storage projects, neither climate finance nor adaption finance constitutes an asset class that institutional investors understand.

Second, we need to listen seriously to stakeholders who seek to build out the pipeline of infrastructure projects to protect vulnerable populations, even as they develop investment opportunities for long-term mitigation and adaptation. To close the key market gap, more public funding is needed for buffering the risks in projects in the $5 million to $100 million range. We don’t start here from scratch; the promising work of Allied Climate and the GAIA Fund on smaller deal sizes and regional-focused emerging managers is instructive.

Third, institutional investors and insurance companies must demand that their money managers create co-investment strategies that link mitigation and resilience rather than spending the next decade simply bidding up the prices of the few, mega-sized solar and wind deals that are getting built. To this end, the Insurance Development Forum has just announced a new fund to invest in resilience for dual-purpose investments like ECOConcrete. The proposed Contingent Resilience-Linked (CORL) Bonding effort from the Anthropocene Fixed Income Institute to achieve synergies between public and private capital, while driving sustainability/resilience development also holds promise for scale.

Fourth, development institutions need to learn to “bank” projected resilience savings for decarbonization mitigation down the road. The forthcoming Milken Institute analysis found that expanded investment in resilience from current levels of $63 billion annually to $300 billion by 2035 would avoid cumulative economic losses on the order of $1.7 trillion in net present value, by 2050 — more than enough to cover projected increased spending over the next decade, which in itself would generate local economic benefits in frontline nations.

Fifth, the proposed shift would not be at odds with critical efforts to also “crowd in” trillions in private sector investment to meet 2050 mitigation goals. Just the opposite: a 10-year pivot to build a resilience and adaption project portfolio would help pool the de-risking dollars, needed data, and new, locally led governance mechanisms we now lack to effectively unlock sidelined capital. A great example of this is the Lightsmith Fund, which is paving the way to better data and has demonstrated value in new investment areas. Another is AXA’s investment in Brazilian-based Mombak to leverage reforestation to capture CO2.

This investment recalibration makes good financial sense, because right now, save for large solar, wind and energy storage projects, neither climate finance nor adaption finance constitutes an asset class that institutional investors understand. In short, we don’t actually know which hydrogen projects are really green, which carbon sequestration or direct air capture projects work best, or how we can efficiently scale the greening of industrial processes like cement manufacturing.

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It’s no secret that this year’s COP is struggling to find a path that that balances the needs of developing nations to stay afloat and fosters new pathways to close the global capital deployment gap. Pivoting the Paris Agreement to focus more on resilience and adaptation would catalyze positive momentum and deal more effectively with growing despair that we are falling far short of the mark. This is decidedly not about abandoning the goal of keeping global temperature increases to 1.5 degrees Celsius. It’s all about finding the money to meet the Paris goals in a newly adaptive way.

main topic: Climate Change