Because the private sector accounts for roughly two-thirds of economic activity in most economies, the transition to a zero-carbon and resilient economy needs to be reflected in private sector financial flows. Although some private capital will be reallocated as market participants measure and manage climate risk and anticipate policies and techno-economic change, the private sector must not merely manage the transition — it needs to participate in creating a more equitable and sustainable economy.
Financial and non-financial corporations are making commitments and setting targets to align their financial portfolios and balance sheets with net-zero and broader sustainability objectives. These financial commitments need to cause real-world changes that support decarbonization and protect nature and biodiversity.
The scale and pace of financial flows to climate- and nature-based solutions must increase substantially. By 2030, we need to increase global private climate financial flows from the current level of $340 billion per year to at least $2.61 trillion a year. In addition, we need to triple investments in nature-based solutions and increase biodiversity financial resources to at least $200 billion per year. Simultaneously, the private sector needs to phase out financing of fossil fuels and technologies that are dependent upon them.
To adequately scale up private sector investment in support of climate and biodiversity goals, we need to mobilize market-steering public finance, decrease the cost of capital for sustainable technologies, and increase capital raised via green financial products.