| By Alastair Marsh As governments around the world work on updating their climate commitments, they shouldn't just try to avoid the looming "trainwreck" of runaway emissions — they also should show investors where the opportunities to finance decarbonization lie. By February, the nearly 200 countries that are party to the Paris climate agreement are supposed to submit new, so-called "nationally determined contributions," or NDCs, that lay out their plans through 2035 to cut emissions and adapt to a warming world. Progress on existing NDCs with 2030 targets also will be a key talking point among world leaders at the COP29 United Nations climate summit in Baku, Azerbaijan, in just over a week. But when crafting NDCs — often dense, jargon-filled strategy documents — governments should consider their target audience, financial professionals say. In addition to the policy wonks and nonprofits that scrutinize these reports, institutional investors are increasingly paying attention. In fact, there's a growing push to make NDCs "investable." According to the Institutional Investors Group on Climate Change (IIGCC), which works to address climate risks with some 400-plus investors ranging from AllianceBernstein to Man Group Plc, this means making clear to potential financiers the direction of relevant policies, the scale of investments required in each country and the specific sectors of the economy where that money needs to flow. "Investors are ready to seize the opportunities presented by the transition, but to do so they need signals from policymakers that promote capital allocation and management of assets in line with the transition to a low-carbon economy," said Emily Murrell, policy director at IIGCC in London. "Making credible, investable NDCs would be a big step forward in promoting a more supportive and stable policy environment that meets the needs of private capital." IIGCC said earlier this year that governments have an opportunity to turn the next round of NDCs into "clear vehicles to attract finance from multiple sources, particularly from private finance." Currently, NDCs "lack crucial details that could meaningfully inform their decision-making," the investor group said, such as information on supporting sectoral policies and mechanisms to address physical risks and the financial impacts from climate change and the low-carbon transition. Quantifying the cost of implementing a country's climate strategy and detailing the sources of finance for each part will also be instructive for investors, Murrell added. By issuing debt instruments that are linked to the implementation of an NDC, countries can demonstrate to investors they are committed to delivering on their climate goals and have a credible strategy for doing so, she said. Governments should think of an NDC much like a "national transition plan" that includes detailed policy outlooks, clear sectoral pathways and specific investment needs, said Luke Nelson, head of international sustainability at JPMorgan Chase & Co. Formulating climate plans in this way would "make them more useful" for potential providers of capital, he said. Pairing ambitious government policies with solutions for mobilizing capital for climate change mitigation — as well as adaptation — will be the key objectives of organizers in Baku. And the cost of failure is already well known: the UN warned last week that the Paris agreement's ambition of keeping global warming below 1.5C will soon be unachievable due to a chronic lack of ambition, and current policies will lead to a temperature rise of 3.1C by the end of the century — a catastrophic outcome for humanity.
"By responding to the finance community's call for investable NDCs and outlining financing strategies, countries could inspire greater confidence in capital providers and boost investment in global climate solutions," said Nelson. Read and share this story on Bloomberg.com. Morgan Stanley has entered into a deal with Climeworks AG to finance the removal of CO2 from the atmosphere, joining other Wall Street heavyweights including JPMorgan in throwing its weight behind the nascent technology. The agreement will enable Zurich-based Climeworks, which operates the world's largest direct air capture project, to suck 40,000 tons of carbon dioxide from the air. The contract runs until 2037 and is intended to help finance the Swiss company's expansion in the US. Morgan Stanley will "secure a sizable volume of carbon removal credits" as a result, Climeworks said.  The Climeworks carbon-removal facility in Iceland Photographer: John Moore/Getty Images Europe - The European regulatory crackdown on greenwashing is having an effect, as asset managers in Europe and the US wind down hundreds of ESG funds.
- Strong pushback from experts has a growing list of major companies ending purchases of cheap carbon credits. Instead, many are now focused on the more expensive task of reducing their own emissions.
- After two weeks of number-crunching, it now seems clear that investors in catastrophe bonds emerged from Hurricane Milton relatively unscathed.
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