BoE’s Carney Sees Up to $7 Trillion Invested in Renewable Energy

  • Investors can seize opportunity presented by climate policies
  • China’s growing green bond market will help drive investment

As much as $7 trillion of investment will flow into clean technologies that can help curb pollution and climate change over the next two decades, Governor of the Bank of England Mark Carney said.

Companies and investors can take advantage of the shift to low-carbon energy, spurred by government policies, as they prepare for the risks climate change may bring, such as rising sea levels, Carney said at an event in Toronto on Friday.

“In terms of orders of magnitude of clean energy, or lower carbon energy infrastructure, cleaner water sanitation etc. that would be put in place over the course of the next 15-20 years,” Carney said. “Given increased urbanization, given brown fields, given policy frameworks that are being put in place -- somewhere in the order of $5-7 trillion.”

Investment in renewable energy globally reached a record $348.5 billion in 2015 -- a year that culminated with almost 200 countries agreeing on a landmark deal in Paris to rein in fossil fuel pollution, according to figures from Bloomberg New Energy Finance. Investment this year is set to decline compared to last year’s record, partly as a result of a slowdown in China, the London-based researcher said.

“All of this has to be mainstream to make a difference,” said Carney, who said the growth in green bonds, would help boost capital market investment in low carbon projects.

As much as $694 billion of bonds currently outstanding globally will support projects that help drive down emissions, according to a report this month commissioned by HSBC Bank Plc. Only about $118 billion of that market is officially labeled “green.” Carney said China is issuing about $500 billion a year in climate-friendly securities.

The governor reiterated his warning that climate change is a “tragedy of horizon”, because its full-impacts fall beyond the typical short-term timescales of bankers, creditors, insurers and others in the financial industry.

The G-20 asked the Financial Stability Board, which Carney leads, to deliver a series of recommendations on how companies should disclose the risks of worsening climate change.

“Investors and credit providers can’t make assessment today about how well prepared companies are for that transition,” he said. “Different companies have different views on the seriousness of the issue and degrees of optimism or pessimism about new technologies that can address the issue. We want to be neutral so all of those views can be expressed.”

“The thing that keeps central bankers up at night is a sudden change of risk.”

Carney said he didn’t think the U.K.’s exit from the European Union would impact on financial markets ability to cope with the tragedy of horizon, predicting the issue of climate risk would remain on the G-20’s agenda when Germany takes over the presidency next year.

“I wouldn’t get too caught up in the current headlines,” Carney said. “There’s always issues on the plate with leaders and the measure of those leaders is the ability to deal with day-to-day and also look to the medium and long-term.”

Before it's here, it's on the Bloomberg Terminal.