In Conversation with Dr. Barbara Buchner

“Currently, it’s exciting to see the climate conversation more mainstream than it’s ever been”, remarks Dr. Barbara Buchner, Global MD of Climate Policy Initiative (CPI) and our guest for Mar’21 ESG theme newsletter. After all, hours after being inaugurated, President Joe Biden reentered the United States in the Paris Climate Agreement. Against this backdrop, it has become increasingly important for an investment professional to know more about Climate Finance.

Read on below to get further insights from our expert in this interesting conversation:

Shivani: CPI was founded with a mission to support nations in building low-carbon economies more than a decade ago. How has been the journey so far for CPI in helping its partners drive economic growth while addressing climate change?

Barbara: It’s both exhilarating and frustrating. In one sense CPI, and many others working in the climate arena, have had tremendous success over the past 10 years in raising awareness in the public and private sectors about how central the climate issue is to economic growth, political stability and our overall wellbeing. We have seen climate move from a fringe issue to high priority for governments, board rooms and investors. Yet, at the same time, we see that people are still laboring under the false idea that one must choose between the climate and the economy. We now have mounting evidence that prioritizing the climate is also the best investment for long-term growth, stability, and resilience.

Shivani: Climate emergency is believed to be a bigger threat than Covid-19. In the last couple of years, we have witnessed extreme weather events like floods, hurricanes, and extreme heat continued to multiply while the allocated funding in climate mitigation solutions was cut back in 2020. What are the implications of this growing investment gap between funding and climate adaption needs?

Barbara: The current investment gap is indeed daunting, but each year of delay increases the costs of adapting to and mitigating climate change. That is why it is imperative for governments to focus their post-COVID recovery packages on investments that produce short-term growth while at the same time building longer-term resilience and sustainability into the economy and our physical and soft infrastructure. It’s not the only action we must take, but it is a rare opportunity to make a big leap in closing the gap. Investing in “business as usual” leaves us as exposed and vulnerable as we were before the pandemic, putting those recovery investments at greater risk of loss.

Shivani: The markets have seen a renewed focus on Paris Climate Agreement in 2021 after U.S. President Joe Biden joined back the accord. How can the U.S. reestablish itself as a climate leader and satisfy the expectations of green groups?

Barbara: We have seen promising action by the U.S. in the few months since the Biden administration entered office. They must keep up this momentum. A key to staying ambitious and building credibility is creating effective policies and incentives to move the private sector, including the financial system, towards net-zero as quickly as possible.

Shivani: There is a case for Securities and Exchange Commission (SEC) in the U.S. and its international peers to strengthen the requirements for disclosures by publicly traded firms of the effects of physical and transition risks attributed to climate change. Can you please share your thoughts on this proposal?

Barbara: It’s essential. Setting goals is important, but those goals are meaningless unless they have a path to implementation, supported by independent, science-based verification of the goals and implementation activities. And investors are increasingly appreciating the near-term implication of those risks. This is why we need governments to take a leadership role in executing quickly on mandatory disclosure schemes. If we delay, it hobbles our ability to iterate quickly enough to be meaningful to investors, and to other market stakeholders. The risks associated with implementing mandatory disclosure schemes too quickly are far less than the risks of delaying action and getting caught woefully underprepared by the next global catastrophe.

Shivani: The Climate Finance Landscape is focused on two areas, Renewable energy and low carbon transport. The other categories like carbon adaptation, energy efficiency, agriculture, forestry, land use have lagged. How can we bridge the financing gaps in these categories?

Barbara: Public and private actors must coordinate to rapidly scale up finance in sectors beyond renewable energy generation. To achieve transition to a low-carbon, climate-resilient economy, all financial actors will need to increase their investment in other sectors, especially energy efficiency, adaptation, and land use. The public sector has an important role in facilitating private finance, through both regulation and blended finance. In addition, a strong commitment to deep decarbonization should emphasize research and development of new technologies, rather than targeting only low-cost marginal abatement opportunities, in order to enable technological pathways to net zero.

Shivani: What will be your message for professionals in the financial sector from the perspective of climate change? How should they prepare to mitigate and manage this imminent risk?

Barbara: Professionals in the financial sector have a heroic opportunity in front of them. Embrace it. Focus your professional development efforts on learning more about climate risk, climate finance flows, and how climate change will impact your clients and constituents. Be a voice for change within your organizations. The evidence increasingly points to great economic and social opportunity if we don’t waste this moment. Help lead us to those opportunities.

Shivani: As a Global Managing Director at CPI, what are the most exciting and challenging parts of your job?

Barbara: Currently, it’s exciting to see the climate conversation more mainstream than it’s ever been. The challenging part is building that momentum into ambitious levels of on-the-ground action in the short amount of time we have left to avert truly catastrophic harm.

Shivani: The talk around gender equality and diversity at the workplace never gets out of vogue, yet the representation of women in senior positions remains abysmally low. Why do you think it is important to promote gender neutrality?

Barbara: What I can see as an economist is that tackling equity issues, whether they are gender, geographic or income, are closely tied to improving overall sustainability and resilience. The private sector increasingly understands that success requires factoring in longer-term social issues that were once considered “externalities.” As we now see, focusing exclusively on short-term economic profits for shareholders does not assure long-term value.

About Dr. Barbara Buchner

Barbara is Global Managing Director of Climate Policy Initiative. Named one of the 20 most influential women in climate change, she advises leaders on climate, energy, and land use investments around the world. Barbara is the lead author on CPI’s Global Landscape of Climate Finance which has set the benchmark for climate finance tracking. Barbara also directs the Global Innovation Lab for Climate Finance, a climate finance incubator that leverages public-private collaboration to develop innovative climate finance instruments. She is on the Advisory Board of the BCFN Foundation, and a member of the One Planet Lab.

About Shivani Chopra, CFA

Shivani has more than 12 years of experience across private equity, investment management, corporate finance and training and has worked with corporates like Genpact and Copal Partners. A CFA Charterholder and Masters in Economics, she is presently a financial consultant at pharma startup named EOS Pharmaceuticals and also a trainer for various finance related courses.