Harnessing the Power of Green Banks to Drive Climate Action
As we headed into Climate Week in New York City last week, we heard calls for swift action on climate change from citizens marching on the streets of cities and towns across the world to the Secretary General of the United Nations. Secretary Guterres urged heads of state to come to New York’s Climate Week with bold action “toward a full transformation of economies.” Finance was one of the four pillars he listed to achieve this transformation.
The imperative of finance as a lever for positive change is perhaps where climate marchers diverge from heads of state working to address the climate crisis. It’s not immediately intuitive; who would think that, for example, creating a bank could help us address this challenge? Finance, however, is critical to any transition to a low-carbon economy, and banks offer a key to unlock needed investment and expertise that can make the difference between a country being able to achieve a carbon-free economy or not.
During Climate Week, RMI cohosted a roundtable meeting where five countries and one city laid out their rationale for developing a green bank—an institution mandated to invest in climate-friendly projects and to attract additional investment into the space. Some participants in the roundtable, like Portugal and Mexico City, are currently in the early phases of exploring how a green bank could help scale up renewable energy, make urban mobility more efficient, and address the impacts they are already experiencing as the climate changes. Others, like Rwanda and Mongolia, are in the process of defining the institutional structure to make sure a green bank meets the needs of their respective countries. Mongolia’s priorities include eliminating air pollution in the country’s capital Ulaanbaatar, one of the five most polluted cities in the world, while Rwanda aims to accelerate renewable technologies while becoming a green finance hub for East Africa.
Countries like Bulgaria and India, which already have green banks, took the opportunity at the roundtable to discuss what their institutions can do to further serve the needs of their countries to expand renewable energy and make current infrastructure more efficient. Green banks in these areas will help make the necessary energy transition from a high-carbon world to a future with not only lower emissions but also more access to energy, better and more resilient infrastructure, and growing economies that are good for business—where investors and companies see opportunity and growth.
The countries, cities, and states that came to our meeting at Climate Week are interested in setting up green banks because they will enable the future we need; the future hundreds of thousands of marchers, strikers, and individuals around the world are calling for. As Mr. Norihiko Kato from the Mongolian Bankers Association said, green banks “make impossible projects possible.” Thirty-six countries want to make impossible projects possible by having institutions that have the climate investment expertise our current financial institutions do not.
Sometimes bold action is about setting up the infrastructure that lets innovation happen and building the framework to support the most efficient buildings, most effective transport, and biggest renewable projects. When countries call for action in the form of institutions like green banks that support these projects, we must heed their call.
