Fighting Climate Change: Impact Investing to Scale

by Rowan Litter

The United Nations Commitment to Battling Climate Change

You might remember that in 2009, the developed states of the United Nations made the commitment to raise $100 billion a year until 2020 to help the poorest countries combat climate change. Why did they make this pledge? Underdeveloped nations cannot afford to raise the money themselves and these countries will be the first to face the consequences of climate change, which industrialized nations are accelerating.

So far, the developed nations who made these promises have failed to meet their obligations. Only $3.5 billion of $10.3 billion pledged to the United Nations program, Green Climate Fund, has been raised. The United States has reneged on its own commitments, first pulling out of the Paris Agreement and then canceling a promised $2 billion in aid last year. The failure to meet even half of the $10.3 billion for the Climate Fund has put the legitimacy of the Paris Accord and public investment into serious question.

So, What Is Happening Exactly?

Those in favor of the Green Climate Fund argue that wealthy nations have an ethical obligation to make financial contributions because climate change affects developing countries the most, and yet these countries are least responsible for causing it. GCF funds are intended to help developing nations prepare for climate-related disasters and assist with implementing low-fossil fuel economies.

The United States, among others, has disagreed, with the current administration arguing that these contributions will eventually cost this country billions of dollars. Other countries are following suit, claiming that if the United States won’t meet its commitments, neither should they – the US has one of the largest per capita carbon emissions rates in the world.

The creation of these aid funds – and their failure to receive sufficient funding from government sources –  points to a growing need for climate-related investments.  Despite disagreement about who ought to foot the bill, there is growing recognition that investment in resilience and a broader transition away from fossil fuels is both necessary and important.   

Bringing the Issue Down to Scale

The struggles we see playing out on the global stage are mirrored on a more local scale.  Just as poorer nations are most vulnerable to the effects of climate change, poorer neighborhoods often bear the brunt of pollution and climate-related challenges. And just as wealthy countries claim there is more risk than reward in investing in developing nations, private investment tends to focus first on affluent communities or higher-return communities, leaving lower-income communities underserved. With respect to investment in solar, we see lots of capital flowing to utility scale projects and to wealthier neighborhoods, creating “solar deserts” in those communities that would benefit the most from lower energy costs and reduced pollution. 

At Sunwealth, our main goal is to provide affordable, clean energy to communities that truly need it. We develop and finance solar projects across all of our communities, with a particular focus on bringing renewable energy access to communities that have been underserved. We combine solar projects into funds and stakeholders invest their money into those funds. Investors then receive financial returns through electricity bill payments from the recipients of this clean power. Power recipients cut their electricity bill by up to 30% and reap the benefits of renewable energy. Investors receive good financial returns and can see, first-hand, their investments helping communities while fighting climate change.

If you are a private investor and are unhappy with how the public sector is dealing with the impending challenges of climate change, do not sit around idle. Solar power is cheaper and more advanced than ever and putting your money into clean-energy projects provides benefits for you and those around you. From a utilitarian view, it is one of the smartest investments you can make.

If you are an advocate against climate change, there is no excuse to not act. Put your money where your values are and show the world that switching to a clean-energy economy is not only financially feasible, but beneficial. The change must start somewhere.

About the Author:
Rowan Litter is a senior at Boston College and is majoring in International Studies with a concentration in Economics. He is Sunwealth’s Investor Community Intern for the Fall of 2018.

Sources:
New York Times, Rich Nations Vowed Billions for Climate Change. Poor Countries Are Waiting, 9 September 2018, https://www.nytimes.com/2018/09/09/world/asia/green-climate-fund-global-warming.html?rref=collection%2Fsectioncollection%2Fclimate&action=click&contentCollection=climate®ion=stream&module=stream_unit&version=latest&contentPlacement=1&pgtype=sectionfront