Climate change is the biggest market failure in history and must be tackled to spur growth, finance and policy leaders agree

Clare Saxon Ghauri
27 September 2014

NEW YORK: This week business and finance leaders met policymakers at an event during Climate Week NYC, to analyze the state of investment in the global low carbon economy following plummeting clean energy costs and increasingly risky carbon assets.

Clean energy investment totaled US$254 billion last year according to Bloomberg New Energy Finance, a company that provides energy analysis for decision-makers. Taking place in Bloomberg's New York headquarters, the 'New models for clean energy investment’ session aimed to dig deeper into this investment figure and ultimately find ways to boost it. Introducing the session was Curtis Ravenel, Global Head, Sustainability Group, Bloomberg LP, who disclosed the company's own commitment to clean energy investments, which are set to soar from 2 to 36 megawatts by 2020.

But while clean energy projects are springing up around the world, risk issues remain an obstacle to attracting new investors, so the burning issue of insurance was addressed by David Bresch, Head Sustainability, Swiss Re, who pointed out climate change has been on the company’s agenda for more than 20 years.

Despite Swiss Re's early action though, he warned, “we can't solve it on our own. Society must become resilient." The insurance expert affirmed that with convergence across sectors, economic prosperity need not be impacted by reducing emissions: "We can reconcile climate action and growth. There can be sustainable growth ONLY if we tackle climate change."

Climate finance

Shining the spotlight on the specific actions needed to curb emissions, Amy Davidsen, US Executive Director, The Climate Group, said US$1 trillion is required, stating: "Finance is a critical element of [climate] progress by 2050.”

Rasmus Helveg Danish Minister for Climate, Energy and Building agreed, calling finance “key” to overcoming the climate crisis, of which he said: “Climate change is the largest market failure known to man." He attributed the causes of this impending loss to the fact fossil fuels are affordable, available and subsidized, but then suggested renewables are becoming competitive.

Clean energy is becoming increasingly cheaper, with a recent study even showing solar PV has reached grid parity in Germany, Italy and Spain. Keen to point out Denmark has long been ahead of this curve, the Minister said: "Denmark has been in investing in renewables and energy efficiency for 40 years which has offered great stability.” He explained Denmark had also cut emissions by over 20% while its economy grew 40%, with Danish renewable exports tripling, illustrating a "huge opportunity we can't afford to miss".

Next Rt Hon Greg Barker, UK Prime Minister’s Envoy on Climate took to the stage, welcoming the greater attention on climate issues brought by the UN Climate Summit but denouncing the lack of countries represented at higher levels: “We’re not going to get a global deal if not enough world leaders are at the table”.

The new Prime Minister’s Envoy explained how the low carbon economy is a “strong reason” to be optimistic though, as the UK is on track for 80% emissions reduction cuts by 2050, but warned capital must be de-risked to leverage investment and secure “maximum bang for buck”, suggesting closer public-private partnerships are needed.

Clean energy growth

Introducing the panel he was moderating, Michael Liebreich, Founder of Bloomberg New Energy Finance set the context by updating the audience on how clean energy investment flows had dropped 20% in the last two years largely due to cost decreases, but that this dip “is turning round”.

While the market may have been catching up with choppy costs, the panel expressed their appetite for increased clean energy investment, with Alfred Griffin, President of NY Green Bank explaining how the Bank supports private sector initiatives and smaller projects in order to help eliminate risk.

Steve Corneli Senior Vice President, Sustainabilty, Policy and Strategy at NRG Energy said clean energy growth is just undergoing a transition from being driven by policy and subsidy to markets and customers, and that clean energy is actually the “perfect sweet spot” for return on investment due to the continued evolution of clean technology and its growing revenue stability.

The global pattern for clean energy investment too, was highlighted by Rachel Kyte, Vice President and Special Envoy for Climate Change, who shared how the Vice President of China said the country is exponentially increasing climate smart investment, at the UN Climate Summit the day before.

Risky carbon

While it’s clear the panelists believe finance and insurance industries are finally reacting to climate change as an opportunity, emissions are still on track to rise to dangerous levels. So when all panellists were asked what single element would accelerate the process and allow clean energy investment to triple, Rachel Kyte affirmed “joined up government”, with Steve Corneli arguing the government in the US in particular should unlock utilities for distributed energy following the regulatory reforms that are currently taking place.

A central barrier to upscale though remains risk, but AJ Sabatelle, Associate Managing Director, Moodys Ratings says solar power is being increasingly seen as “less risky” than wind power technology, and that the tables are turning as coal is now being thought of as a riskier asset.

Risk expert, Juerg Trueb, Head of Swiss Re's Environmental & Commodity Markets department, said the insurance industry’s role is to properly analyze renewables in order to address risk and tackle related barriers.

But with the economy tipping toward a low carbon transition as exemplified by the launch of new business-centric initiatives over the last week, including We Mean Business and RE100 - whereby leading companies commit to going 100% renewable - clean energy only looks set to cement its crown as the more secure, more affordable, and absolutely critical power source for sustainable, economic growth.

The event took place at Climate Week NYC, which is the collaborative space for all related events in support of the UN Climate Summit. 

For a full list of Climate Week NYC events, please visit and follow the conversation on Twitter using #CWNYC.

You can also see our Climate Week NYC media resources for press releases, contacts and more info.

See some photos of the Climate Week NYC Opening Day here:

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