Panel
Investing in Climate Action
Milken InstituteSpyros Kouvelis, Julia Bucknall, Saadia Madsbjerg, Vijay Manthripragada, Nelson Switzer, Gary White
- The session framed climate action as a cross-cutting necessity linked to all 17 UN Sustainable Development Goals (SDGs), emphasizing that climate change mitigation and adaptation must address water, health, food, and employment to achieve timely results.
- The World Bank estimates that $12.7 trillion is required between now and 2030 to meet Paris Agreement goals, a sum that must originate primarily from capital markets rather than public or philanthropic funds alone.
- The World Bank is on track to achieve its 2020 target of 28% of total investments having climate co-benefits, currently at 26%, representing approximately $15 billion annually in climate finance.
- World Bank strategy focuses on using public funds to de-risk private investment through targeted risk mitigation, enabling the scaling of projects in natural resources, forestry, and coastal zones.
- A key trend identified in 2017-2018 involves major institutional shifts where BlackRock, Vanguard, and Moody's began mandating climate risk disclosure and potential credit rating impacts for entities lacking adaptation strategies.
- The insurance industry faces unprecedented losses, with Northern California wildfires estimated at $9 billion and Atlantic hurricanes (Harvey, Irma, Maria) estimated near $100 billion, driving the sector to price climate risk more aggressively.
- Vijay Mathripragada (Montrose Environmental) argues that "investing in climate change" is a clunky frame, proposing instead a business case for "helping people help the environment" within a complex biosphere context.
- Montrose Environmental, a 5-year-old firm, has grown to 1,200 employees and 50+ offices globally, doubling in size every two years despite a fragmented regulatory landscape in the US.
- Vijay identified inconsistent and contradictory regulations as a primary risk for environmental businesses, calling for policy simplification to align capital markets and spur innovation.
- Nelson Gallagher (Nestlé Waters) challenged two false narratives: the choice between adaptation vs. mitigation, and the notion that sustainability requires societal suffering, asserting that prosperity and sustainability are mutually reinforcing.
- Nestlé emphasizes "collective action" in water stewardship, prioritizing local community partnerships and context-based targets over reliance on regulatory risk mitigation alone.
- Gary Wise (Water Equity) highlighted that 2.1 billion people face water scarcity, with the poor currently paying $200–$300 billion annually in "coping costs" rather than accessing formal water infrastructure.
- Water Equity has created an investable solution targeting a 3.5% return for investors while aiming to connect 4.6 million people to water and sanitation, leveraging a $50 million fund with commitments from Bank of America and the Hilton Foundation.
- The World Bank cited an Ethiopia case study where 10 years of public investment in landscape restoration enabled private investment in coffee, honey, and beehives, demonstrating how public "social protection" can catalyze private market entry.
- The session noted a data gap: while 80% of global water is used for agriculture, approximately 25% of fresh water is wasted on food that is ultimately discarded.
- Sadia Masberg (Rockefeller Foundation) cautioned against relying solely on small-scale pilots, urging the development of scalable financial products that operate within standard market parameters.
- The panel identified specific investment opportunities for the private sector:
- Water Equity Fund: Targets 100,000 people per $1 million invested, with a 3.5% annual distribution and a 10% first-loss guarantee.
- Green Infrastructure Bonds: Municipal "pay-for-performance" bonds, such as the DC Water issuance, to finance green infrastructure.
- Land Degradation Neutrality Funds: Private equity vehicles for land rehabilitation, with returns comparable to sustainable infrastructure funds.
- Renewable Energy: Specifically "Green Coat UK Wind" and emerging markets in developing nations for land degradation and climate-smart agriculture.
- Water Technology: Israeli innovations in irrigation (e.g., Netafim) focusing on reuse, recycling, and the "Internet of Water" analytics.
- Piros Kouvelis concluded by noting the UN Environment Programme's intent to leverage data analytics and artificial intelligence to reduce decision-making complexity in climate investment.