A total setback of U.S. financial and political support for international climate initiatives is far from guaranteed, even in a likely climate-skeptical second Trump presidential term, according to Erich Cripton, director for business relations at Caisse de depot et placement du Quebec, Montreal.
CDPQ had C$542 billion ($324 billion) in assets as of June 30.
“We should wait and see what happens (regarding the U.S.),” Cripton said.
Cripton made the remarks in an interview with Pensions & Investments on the fourth day of the COP29 climate conference hosted in Baku, Azerbaijan, the dedicated finance-related day of the event. Prior to joining CDPQ, Cripton was a diplomat for the Canadian government.
Cripton is responsible for CDPQ’s U.S. government relations, and is also co-lead of the Glasgow Financial Alliance for Net Zero transition finance working group.
“Obviously there's going to be a change in the federal level, but the U.S. is like Canada in the sense that it’s very decentralized. A lot of the main areas of action and interest are at the state level,” Cripton said.
Currently, 23 out of 50 U.S. states have governors that belong to the Democratic party, which has previously made greater effort in pushing net-zero and climate transition policies.
On a federal level, the 2022 Inflation Reduction Act also offers more green jobs and renewable investment opportunities in Republican governed states, raising doubts as to how far a Republican-controlled federal government will go to repeal the law.
Cripton also identified the energy sector as a key opportunity for institutional investors, while acknowledging that the often relatively small scale of projects was a continuing issue for large pension funds.
“A lot of the climate-related investment is in the energy sector. It was the first to approach the transition, and the technology is there,” Cripton said. “A lot of the other hard-to-abate sectors are just not ready. Here it's very hard to find an investible pipeline of projects for us to deploy our capital. In our portfolio we've dramatically cut our emissions, but we also operate in economies where such emissions are still increasing. So it's about finding those opportunities while being anchored in the real economy.”
On Nov. 13, at a side event on health and climate change, World Health Organization Director-General Tedros Adhanom Ghebreyesus stated that “We are all here this week not simply because our climate is changing, but because of the impact that our changing climate has on human health.”
Ghebreyesus went on to state that rising temperatures contribute to cardiovascular disease and fuel the spread of communicable disease, and that air pollution contributes to 7 million premature deaths a year, citing WHO data.
On the finance day of COP29, Jonathan Dean, head of fund management within impact private equity at AXA IM Alts, also emphasized the relationship between healthcare and climate change: “Being at COP I’m hearing very clearly that these links are being made by the wider community, that climate change is driving disease and mass migration and putting pressure on healthcare systems that cannot cope,” Dean said in an interview with Pensions & Investments.
Richard Folland, Carbon Tracker’s policy and government affairs adviser, sees public-private partnerships as crucial to hitting global net-zero targets. A stated mission of NGO Carbon Tracker is to mobilize capital markets for energy transition, emphasizing the role of private finance and sources such as blended finance. However, there are challenges in scaling up blended finance, which raised only $15 billion worldwide last year according to data from industry body Convergence,
In an interview with Pensions & Investments, he also underlined the need for COP29 delegates to showcase to financial institutions the importance of integrating finance and investment plans into upcoming Nationally Determined Contributions, a global carbon emissions stocktake due from each country by the end of February as part of the Paris Agreement.
At COP29, Tom Eveson, global head of sustainable finance and a VP at Morningstar Sustainalytics, was keen to hone in on further topics that had been discussed so far at the event, such as the evolution of sustainable finance, emphasizing the shift in focus from developed to emerging markets and the inclusion of hard-to-abate sectors.
“Whereas at earlier COPs, delegates and financial institutions discussed agreements on targets, now it's discussions on strategy and commitments,” said Eveson in an interview with Pensions & Investments.
“Now you have a huge amount of capital coming in that knows where it needs to be going to most effectively target climate change, and that’s within the Global South.”
As part of this shift being seen at COP29, the second day of the event saw the formal creation of the Loss and Damage Fund, first proposed at COP27 in Sharm El-Sheikh, Egypt. This fund looks to support developing countries that are particularly vulnerable to the adverse effects of climate change.
In the evening on the first day of COP29, parties also agreed to strong standards for a centralized carbon market under the United Nations, as part of Article 6.4 of the Paris Agreement — a key development in pushing forward long-overdue updates for an international carbon market.
Regarding developments in the carbon markets, both Dean and Folland expressed cautious celebration and a desire to further explore the legislation, using the same phrase: “The devil is in the detail.”
