Funding pledges pour in for developing countries, but questions remain

President Joe Biden and other heads of state have wrapped up their big speeches at the international climate summit in Glasgow, Scotland. Now, the tough negotiations begin, largely behind closed doors.

Over the remaining 10 days, as negotiators from nearly 200 countries discuss how to make further progress on climate change, one of the biggest sticking points remains money. On Wednesday, governments and private investors announced a series of initiatives aimed at helping poorer countries avert the dangers of rising temperatures.

A group of philanthropic foundations and international development banks announced a $10.5 billion fund to help emerging economies make the switch from fossil fuels to renewable sources. Treasury Secretary Janet Yellen said the United States would support a financing mechanism that aims to direct $500 million a year for similar efforts through bond sales. And a coalition of the world’s biggest investors, banks and insurers that together control $130 trillion in assets said that they were committing to use that capital to hit net zero emissions targets in their investments by 2050.

While those dollar amounts are eye-watering, the challenge is how exactly to use that money to transition energy systems and companies’ supply chains to net-zero targets.

“We must be honest about what this means,” Ben Caldecott, the director of the sustainable finance group at the University of Oxford, said in a statement. “It does not mean that $130 trillion is in a war chest promised for deployment into a solutions to climate change today.”

“We urgently need to focus on the quality and integrity of promises made by financial institutions, not simply their quantity,” he added.

An estimated $100 trillion to $150 trillion in investments would be required over the next three decades to reach net zero, so Wednesday’s announcements could in theory provide the necessary financing. Larry Fink, the chief executive of BlackRock, the world’s largest asset manager, said the $130 trillion should not be a surprise but cautioned that the funds would be spent slowly if the public and private sectors don’t work together.

“The realities are deploying that capital are going to be far harder than investing in a normal bond, a public equity, a treasury bond,” Fink said on a panel in Glasgow. To invest that money in a “safe and responsible way,” he said, there needs to be a better system than the one that exists today.

Poorer countries have long demanded more aid from wealthier ones, whose emissions are principally responsible for temperature rises so far, both to accelerate the shift to cleaner sources of energy and to help them adapt to the dangers of climate change.

A decade ago, the world’s richest nations, including the United States and the European Union countries, pledged $100 billion annually in climate finance to developing countries by 2020. According to the Organisation for Economic Cooperation and Development, they are falling short by tens of billions per year.

Last month, rich countries outlined a plan to make good on their pledge by 2023. And Tuesday, Japan pledged an additional $10 billion in new financing to help countries in Asia slash their emissions of greenhouse gases. But developing countries have said that is not nearly enough.

© 2021 The New York Times Company