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Financing Climate Futures

Rethinking Infrastructure

image of Financing Climate Futures

Infrastructure worldwide has suffered from chronic under-investment for decades and currently makes up more than 60% of greenhouse gas emissions. A deep transformation of existing infrastructure systems is needed for both climate and development, one that includes systemic conceptual and behavioural changes in the ways in which we manage and govern our societies and economies. This report is a joint effort by the OECD, UN Environment and the World Bank Group, supported by the German Federal Ministry for the Environment, Nature Conservation and Nuclear Safety. It focuses on how governments can move beyond the current incremental approach to climate action and more effectively align financial flows with climate and development priorities. The report explores six key transformative areas that will be critical to align financial flows with low-emission and resilient societies (planning, innovation, public budgeting, financial systems, development finance, and cities) and looks at how rapid socio-economic and technological developments, such as digitalisation, can open new pathways to low-emission, resilient futures.

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Reset the financial system in line with long-term climate risks and opportunities

There is an urgent need to mobilise all sources of private finance to scale up and shift infrastructure investment towards low-emission, resilient projects. An array of rules governing the financial system favours the status quo and stands in the way of the necessary reallocation of capital. Decision-making processes are distorted by inadequate climate risk pricing, capabilities and biased incentives in the investment value chain. This chapter reviews the barriers linked to a radical reallocation of capital to low-emission, resilient infrastructure, and proposes three priority actions to scale up and shift investment at scale: integrate climate impacts in investment decisions and strategies, increase transparency and disclosure of climate-related risks and opportunities in financial markets, and bolster the role of financial supervisory authorities to ensure a stable and sustainable financial system.

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