Long term investors like SWFs, pension funds can be tapped to finance greening of economy: Amitabh Kant

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New Delhi: The world is flush with funds and with right steps, private capital and investments from pension funds and sovereign wealth funds (SWFs) can be effectively deployed in meeting the green transition of developing nations, G20 Sherpa Amitabh Kant said at a conference in the capital.

New Delhi: The world is flush with funds and with right steps, private capital and investments from pension funds and sovereign wealth funds (SWFs) can be effectively deployed in meeting the green transition of developing nations, G20 Sherpa Amitabh Kant said at a conference in the capital.

Speaking at the second day of the G20 conference on ‘a green and sustainable growth agenda for the global economy,’ Kant said that geopolitics should take a backseat at the global economic forum and sustainable development goals should receive primacy at the grouping of nations that accounts for over 80% of the world’s output.

Speaking at the second day of the G20 conference on ‘a green and sustainable growth agenda for the global economy,’ Kant said that geopolitics should take a backseat at the global economic forum and sustainable development goals should receive primacy at the grouping of nations that accounts for over 80% of the world’s output.

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Kant said that there are different estimates of the financing requirement for addressing sustainable development and net zero emission needs but global assets held by long term investors like sovereign wealth funds and pension funds could be tapped.

Kant made a strong case for evolving systems so that more private and institutional investors invest in projects that help nations to meet SDG and net zero emission goals.

“Although the scale of financing gap–when you talk about $ 5 trillion or $7 trillion etc.–appears daunting, it is far less insurmountable when contrasted with overall global financial assets which are available,” Kant said, estimating it to be in the range of $350 trillion.

“The infrastructure that can help to achieve global net zero emissions also represents unprecedented source of economic opportunity. Over $90 trillion worth of opportunity is available if you are able to make transition from fossil fuel to green fuel, compared to a business as usual scenario. I have always believed that there is no shortage of funds. In fact, the world is flush with funds,” Kant said.

“So what we are talking about is very small sums needed to transform the world. Of this, institutional investors account for almost $150 trillion and much of this is held by pension funds, insurance companies and sovereign wealth funds (SWFs)… Long term investment horizons of these institutions are actually quite well suited for investing in infrastructure,” Kant said.

“The entire SDG and net zero financing gap in developing countries could be met through a shift of just around 1.1% of these assets. Our ability to be able to put private sector funds into areas where we need to deploy them expeditiously is critical,” Kant explained.

The challenge is not about resources, Kant said. The challenge, he said, is to increase the risk return-nexus and to increase co-investments. And this would require public institutions to offer insurance or insurance-like products to protect against risks and to reduce the cost of capital, Kant said.

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