“We are told consistently by financial leaders that trillions of dollars of capital are committed to transforming economies cities, etc. to achieve net zero, yet many of you have noticed that the despite the large amounts quoted the flow appears to be a trickle,” said Simon Perham, head investor outreach Europe, at Carbon Tracker, who moderated the first panel of the day at Sustainable Finance Live 2023.
Perham was joined by Kaj Embren, senior advisor, Kaj Embren Ltd; Sophie Kempthorne, innovation lead, Innovate UK KTN; Vera Kukic, UK lead for sustainability in financial services sector, IBM; and Amandine Tetot, head of project finance, Triodos Bank.
Initially, Perham asked Kempthorne about the argument that some of the biggest barriers to investment in gaining clean and affordable energy are not technological, or financial, but human. In response, Kempthorne said: “We're asking local authorities mainly. Capacity and skills to develop the pipeline of projects needed to decarbonise local economies is one of the biggest barriers, not technology. Local and city authorities are well positioned to drive this. They are responsible for governance, for planning, have the reach across the public and private sectors at the local level, who are key drivers for mobilising these projects and mobilising the capital that we need for those projects to do that. Yet they are the organisations within the public sector that have the least capacity at the moment to do that.”
Kukic developed this point further and she stated that the “technology exists, however, we need the upstream and downstream in infrastructure for clean energy to work.” Embren added to this and believes that “the political sector has a critical role to play. This is a human issue. It's about leadership. It's about bottom-up top-down.”
On this bottom-up perspective, Tetot emphasised “how powerful the bottom-up small projects can be on many aspects, including creating capacity. We've seen so many small communities we started financing probably 10 to 15 years ago, with a small project here, with an idea, only volunteers and now they’re proper large organisations.”
Looking towards the cost of green energy, Kempthorne argued that, “if we balance the local energy demand and supply in a much more clever and integrated way that utilises digital optimisation and enables local energy market structures to open up investment locally in those solutions. We can save a huge amount of money just by driving down demand and better managing demand and supply at the local level."
She gave the example of their “Greater Manchester local energy market project, we invested up to £3 million in it, initially, a relatively small amount of grant funding, and the local energy market model that they were able to develop showed that within the first five years, they will be able to save £40 million a year in negated grid reinforcement costs.”
Kempthorne further argued that “citizens hold the key in providing consent for all those changes we need to make to our cities and towns, and that enables demand for those products and services. And that in turn, drives adoption and deployment. So, ESG isn’t just a nice to have, it’s something real that is grounded in the reality of our everyday lives that drives return on investment.”
On the topic of ESG data, Kukic argued: “We need to recognise that new standards will be emerging, new data will be available, level of granularity will be higher, and actually the calculation methodologies that will be used will get more scientific. That's why I think we need to get more transparent and need to stop hiding behind data.”
Tetot emphasised the importance of “remembering the role of financial institutions in working with their existing customers.” She further elaborated that “it's also about working on bringing along those customers or counterparts that you already have. If it's not about climate mitigation, it's about climate adaptation. So you challenge your existing customers and partners and projects.”