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Year in Review: 2030 Finance
Inflection points and increasing returns. A big-bank friend corrected me after I wrote recently that, looking back from 2030, “it may be clear that a titanic shift already was underway by 2017.” For green financing, he said, date it to 2013. That year, clean energy tapped the bond markets, with solar securitizations, yieldcos, green bonds and more. Green bonds recently passed the $100 billion mark. “That was the watershed year,” he said. “Now we’re just upscaling.”
The long view was all the more important in 2017. By year-end, it was clear that a critical mass of global investors remained pointed toward the shared goals for 2030. Building the low-carbon economy and remaking every system will absorb much more than the $1 trillion in annual investment needed to cut carbon emissions or the $2.5 trillion each year that would meet the 17 Sustainable Development Goals. There was more than enough capital to go around, even before the U.S. tax cuts.
The mobilization of capital for the 21st-century transformation of food and agriculture, health and education, cities and ecosystems, may track five years or so behind renewable energy. But after moving very slow, capital can move very fast. The technology is solid. The models are proven. The payoffs are clear.
And increasingly, the financing structures are in place. Here come credit ratings and third-party opinions, audits and standards, risk-sharing and securitization. What is the way to get to 2030? Step by step.
— David Bank, Editor
#2030 Finance on ImpactAlpha
- Investors, meet the global goals. ImpactAlpha’s new 2030 Finance hub will introduce the leaders and doers who are turning funding gaps into investment opportunities. Our tagline is meant to be descriptive, as more investors find the goals to be powerful drivers of opportunities and solutions. And predictive, of the Times Square headlines as the ball drops on New Year’s Eve a dozen or so years from now: “We Met the Global Goals.” See why we’re all over the 2030 beat.
2. Global asset supertankers turn toward 2030. That huge pension and sovereign-wealth funds would lead the capital markets’ rotation toward social and environmental value-creation would have seemed laughable even five years ago. Now, that 25 such pools of capital, with more than $15 trillion in assets, have started to shift course, it seems almost inevitable. When you’re a “universal owner,” there are no externalities. Learn from leaders.
- See also: European Pension Funds Tilt Capital Toward ‘SDG Investing’
- Call to action: Align global assets with global goals
3. Bigger tickets, bigger funds. Let the #dealflow speak for itself:
- TPG Growth’s Rise Fund raises $2 billion for 2030 goals
- World Bank raises $173 million with first SDG Bond
- World Bank vets launch $1 billion BlueOrange Fund
- UBS to invest $5 billion for 2030 Sustainable Development Goals
- Denmark launches fund to mobilize $5 billion for the Global Goals
4. #WeAreStillIn and halfway home. ImpactAlpha had reporters at COP23 in Bonn (or was it Fiji?) and One Planet in Paris. The takeaway: the world is moving on, and so are U.S. cities and states. Indeed, the U.S. is already halfway to the 2025 goal of reducing emissions by more than 26%. The road gets tougher from here. Renewables, at about $300 billion a year, are only one part of the solution. Set to grow: green buildings ($388 billion annually), climate-smart urban transport ($288 billion), water recycling ($23 billion), and municipal waste management ($160 billion) and the huge upside in energy storage (from only $2.5 billion now).
- Investors look beyond renewables
- America pledges itself (almost) all-in on climate action
- Climate action is China’s chance to step up to superpower leadership
- We’ll always have Paris, but is that enough to avert climate catastrophe?
5. Sustainable Development Goals arrive as universal impact investment framework. After “know what you own” comes “alignment.” This year, companies, asset owners and fund managers beat a path to tout their support for the SDGs. Next year will be about watching whether the money really starts to move toward meeting the global goals. The most popular SDGs: №1 (No poverty), №3 (Good health), №6 (Clean water) and №7 (Affordable and clean energy). The least targeted SDGs? №14 (Life in water), №15 (Life on Land), №16 (Peace, justice and strong institutions) and №17 (Partnerships for the goals). Look who’s aligning with the SDGs.
- European Pension Funds Tilt Capital Toward ‘SDG Investing’
- Yes, peace, justice and strong civic institutions are investable
- Toniic’s tool helps investors map impact themes to the 17 global goals
- More SDG investing tools
6. The $12 trillion opportunity, every year. “Trade-off” is so last year. Abraaj’s Arif Naqvi declared the Sustainable Development Goals a “trade-on.” The global goals are the new global growth story. Just four sectors — energy, cities, food and agriculture and health and well-being — offer $12 trillion in annual cost savings and revenues. The “Better Business, Better World” report cites 60 sectors that could account for 10% of global GDP by 2030 — and create 380 million new jobs by 2030. Here’s how a problem becomes an opportunity.
- In the Middle East and North Africa, 2030 goals mean $600 billion opportunity
- Asia’s chunk of the SDG booty could be $5 trillion
- Listen: Are you down with the SDGs? (podcast)
7. The Abraaj way. Born in Pakistan and based in Dubai, Arif Naqvi in 15 years has grown Abraaj into $13.6 billion private-equity growth-markets powerhouse. Abraaj recently stood up a $1 billion fund for health systems in megacities of Asia and Africa, one of the world’s largest pools of private capital in the world pointed toward SDG №3, “Ensure healthy lives and promote well-being for all at all ages.” On the conference circuit this year, Naqvi called out his fellow investors. “Great businesses are fundamentally addressing societal challenges,” says Naqvi. Arif Naqvi takes global financiers to task.
8. In the age of superabundant capital. More than $9 trillion of global government debt is held in negative-yielding bonds. As much as $50 trillion in citizen savings earns little to no interest. In a world awash with such capital, U.N. chief António Guterres says, “We can grasp the opportunity to reshape finance according to our urgent, collective needs.” Adds the GIIN’s Amit Bouri: “We’re not just keeping pace with capital markets, but reinventing them entirely.”
- The age of superabundant capital is here
- “Vast pools” of institutional capital available for sustainable development
- Designing a global financial system fit for (sustainable) purpose
- Unlocking blended finance for the 2030 global goals
9. Finding finance “unicorns” with billion-dollar potential. To get to $1 trillion, you have to get past $1 billion. The Rockefeller Foundation is on the hunt for 10 financial structures that can mobilize at least $1 billion to meet Sustainable Development Goals. The trick: wrapping complexity in standard, easy-to-execute wrappers. Here come the SDG-finance unicorns.
10. Six trends to watch for 2030 #Signals. Progress against poverty is uneven. Demographic dividends are dicey. Climate change is here. Open trade must work for all. Go local with tech innovation. And №6: Attract private investment to long-term sustainable development. We face important choices.
- Turn toward “My Country First” could block 2030 global goals
- How one small city is mapping its future to the 2030 global goals
- Think globally, implement locally to reach 2030 global goals
Onward! Please send news and comments to TheBrief@impactalpha.com.