Crypto News: Net zero goes to Africa

By Alastair Marsh

"Net zero" was virtually the only talking point when finance luminaries gathered at the United Nations climate conference in Glasgow last year. Rishi Sunak, then UK chancellor and now prime minister, spent finance day at COP26 speaking of the need to create a net-zero-aligned financial center. Mark Carney, former Bank of England governor, announced finance firms with $130 trillion of assets were committed to net-zero financed emissions. And European Central Bank executive board member Frank Elderson said central banks were prepared to support the transition to net zero.

At COP27, which kicks off next week in Sharm El-Sheikh, the conversation will need to be broader. That's because bankers bringing a net-zero message to Africa risk sounding as out of place as the wail of bagpipes in an Egyptian souq.

Egypt and the broader African continent have contributed just a fraction to global greenhouse gas emissions, and yet will be among the most vulnerable countries to climate disasters. As such, a key focus of COP27 will be getting rich countries that have done the most to warm the world to commit more funding to help developing nations adapt, with discussion expected to touch on compensation for climate damages.

"Africa has produced around 3% of global emissions but is in the front line of physical risk from climate change, so being preached to on net-zero emissions is going to be jarring," said James Vaccaro, who leads the Climate Safe Lending Network and sits on the advisory board of the Glasgow Financial Alliance for Net Zero, or GFANZ. "They want to focus on the critical task of financing adaptation and climate resilience."

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Not everyone thinks GFANZ's net-zero message will be out of tune. Hendrik du Toit, chief executive of $154 billion investment firm Ninety One and advisory board member for GFANZ's Africa Network, said it is "absolutely appropriate" to discuss net zero in Africa. Even though "rich-country governments have not yet come to the party helping the poorer nations," he said, the scientific imperative to reach net-zero emissions by 2050 to avoid catastrophic global warming still remains.

GFANZ, a Carney initiative that has gathered many of the world's biggest banks, insurers and asset managers in the name of eliminating emissions from their portfolios, will still probably need some other talking points in Sharm El-Sheikh. With around $150 trillion of assets now backing the alliance, $20 trillion more than in Glasgow, talk will turn to how to get those dollars to support climate projects in emerging markets where the biggest climate impacts can be had.

"Emerging economies weren't impressed by the $130 trillion declaration in Glasgow; they were interested only in the mechanisms to get hold of it," said James Close, the former director of climate change at the World Bank who is now head of climate change at NatWest Group Plc. "That is the crux of matter."

GFANZ said in its progress report at the end of October that the alliance has worked "to develop and support" initiatives to scale up financing to developing economies, including so-called Just Energy Transition Partnerships, which aim to steer countries such as South Africa and Indonesia away from coal and toward cleaner forms of energy.

For the denizens of big finance that have signed up to GFANZ, an African COP also offers a rare chance to see more clearly the front lines of climate change. (Although many of the Wall Street heavyweights that attended COP26 will skip COP27).

"An African-hosted COP may help the global community appreciate more viscerally the likely physical impacts of unmitigated climate change," said Venetia Bell, chief sustainability officer at GIB Asset Management. "The adaptation investment needed in Africa is already challenging on current trajectories."

Still, du Toit warned that focusing the conversation exclusively on adapting to global warming would at this stage be surrendering to the threat of climate change: "GFANZ doesn't have a defeatist spirit."

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Government plans to cut greenhouse gas emissions aren't enough to avoid catastrophic global warming. The planet is on track to heat up between 2.1 and 2.9 degrees Celsius by the end of the century compared to pre-industrial times, according to the United Nations Framework Convention on Climate Change.

The Mosquito fire burning near Volcanoville, California, US, on Sept. 9, 2022. Photographer: Benjamin Fanjoy/Bloomberg

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South Africa expects an $8.5 billion climate-finance package that it's negotiating with some of the world's richest nations to attract significant additional funds to help it transition away from coal.
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