Why green finance and investment is set to boom post COP26

The start of November saw a heavy global focus on tackling carbon emissions and the impact of global warming. COP26 marked a significant event in that world leaders have finally begun the crucial transition into environmentally sustainable practices and green technology, despite some missed target and last minute changes to the pact.

Research from Global Investor Insights found that 82% of institutional investors believed a company’s value increased by 20% or more when it had a positive Environmental, Social and Governance (ESG) rating. With this in mind, global finance expert, Reece Tomlinson of RWT Growth (https://www.rwtgrowth.com/) has provided an analysis of what the outcomes mean for the future of finance:

Reece Tomlinson, founding partner of RWT Growth:

“There are many things that are still left undecided following COP26; however, one things is for certain – world leaders are recognising the need to limit global warming so the worst impacts of climate change will not be felt. To do so requires emissions to be cut by 45% by 2030, which is a far stretch for nearly every attendee nation of the COP26 and an even more remote stretch when considering that certain industries and large emitters have been left out of the equation entirely.”

“Whether or not the suggested actions committed to by world leaders at COP26 is enough and/or will even be adhered to is up to debate. If history repeats itself, we can expect the outcome of COP26 to be less than effective. Yet amidst this largely non-committal political rhetoric is a shining win for those committed to saving this planet and that win is solely situated in the world of finance.”

“As an investment banker who has worked on financing clean tech projects across North America, Europe and Africa and working with entrepreneurs developing ESG friendly products, this new level of interest and capital availability is exciting and encouraging.”

Focus on Green Technology

On the heels of COP26, both national funding programs and banks from around the world and the UK have been announcing committed capital to support green technology, green projects and entrepreneurs focusing on the matter such as the recently announced HSBC UK £500M green fund for SMEs. In addition, market sentiment is recognising that ESG is not only good for the planet but also for business. According to research from Hargreaves Lansdown, investment into responsible funds are up 6000% over the same period from 5 years ago.

Is Green Technology feasible?

The feasibility of green technology, green projects and backing entrepreneurs focusing on green projects has only been recently recognised. In any sector, it goes without saying the entrepreneurial ventures are generally limited by the available capital they can access. Capital begets capital, and as such, when the flow of capital into green technology and ESG friendly businesses becomes increasingly financially feasible (without large amounts of subsidies), and outpaces the performance of those that are not green friendly, it is likely that there will be continued investment in the sector. It can already be seen that this is now beginning to happen in a real and substantial manner.