16th September 2012 – “We are currently on the road to catastrophic climate change. We all need to take action.” As an introduction to a conversation about the role of bond markets in boosting investment in clean technology, these words are a stark reminder of what is at stake.

But Sean Kidney, founder of the London-based Climate Bonds Initiative, stresses the importance of understanding the case for developing a market in debt products that help to reduce greenhouse gas emissions.

He adds that the above is not his judgment but that of Fatih Birol, chief economist at the International Energy Agency.

“The technology, the capital, the capability and the policy understanding to tackle climate change is there,” he adds. “But there is a failure of leadership and a lack of investment. It is frightening just how clear the science is and just how opaque the discussion is – the discordance is extraordinary.”

So where do the bond markets come in? The IEA says $500bn per year must be invested in clean energy between 2010 and 2035.

Yet according to the UN Environment Programme, global investment in renewable power and fuels was $211bn in 2010. “The gap between the level of capital investment required and the actual level of investment is creating a clean energy investment gap,” UNEP says.

The challenge is one of timeframe, according to Mr Kidney. “For many – although not all – clean energy technologies, over three, five or even 15 years, the investments do not yet make economic sense. But over 40 years it becomes economic.”

The bond market is almost twice the size of the equity market, he adds, meaning much of the funding for climate solutions should come from this source.

by Mike Scott – Financial Times


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