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Greater private investment is essential to tackle the climate crisis – Financial Times

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Last month, the Chinese government instructed the country’s coal mines to “produce as much coal as possible”. The injunction came after weeks of power shortages forced the government to ration electricity at peak times and factories to stop production. Industrial production plummeted in response.

China is the largest producer and consumer of coal in the world. Its demand for energy is huge — and rising. And it is not alone. The OECD, a group of mostly rich nations, estimates that at least $35tn of investment is needed by 2035 to meet rising energy requirements in non-OECD countries. Meeting this demand is critical for these countries’ economic development — and, without a vast increase in access to renewable energy, reliance on fossil fuels will only increase.

As the UK hosts COP26 this month, China’s decision is a stark reminder of reality. Its move to ramp up coal output comes only a few months after the authorities had imposed curbs to meet carbon emission reduction targets. For the diplomats and non-governmental organisations gathering in Glasgow, then, pushing for more investment into renewable energy must be a key aim.

Meeting the world’s energy needs will be a collective effort. It will require ambitious policy choices and public money, but also mobilising much more effectively the pools of private capital available for investment across the globe. Mark Carney, former governor of the Bank of England, and the UK prime minister’s finance adviser for COP26, refers to the commercial opportunities that climate change presents as “amazing” and “unprecedented”. But, if these opportunities are not seized, facilitated, and enabled by the decision makers at COP, the world will not get to net zero.

Pioneers in the investment industry are already taking advantage of these opportunities. Energy 4, a private equity fund managed by specialist asset manager Actis, aims to increase access to renewable energy for communities in low- and middle-income countries in Latin America, Africa and Asia. It does so by investing in electricity generation and distribution businesses while delivering risk-adjusted commercial private equity returns.

Demand to invest in the fund has been substantial. By mid-2017, it had exceeded its $2bn target size after seven months and hit its maximum fund size of $2.75bn four months after the initial close. Investors in Energy 4 include pension funds, insurance companies, endowments and sovereign wealth funds from across the globe.

Critically, the outcomes of the Actis fund are not just positive for the planet, but for the people inhabiting it. This is a key tool in the fight to address the climate crisis and for the future of green finance. To achieve widespread, global backing for the vast changes required to reverse climate change and biodiversity loss, the needs of the people most affected by them must be addressed.

The transition to net zero has to be an inclusive and just one — because otherwise it simply won’t happen.

As part of a task force set up under the UK’s presidency of the G7 this year, the Impact Investing Institute is showcasing examples of investment vehicles, such as Energy 4, that deliver positive outcomes for people and the planet as well as a financial return.

We are also urging greater ambition from both public and private investors to deliver a just transition. We believe that, internationally, policymakers and investors, both public and private, can be supported in mobilising significantly more capital towards this end.

Our work on the task force will provide practical tools for policymakers and investors so that a just transition approach can be integrated into public policy design and investment strategies. We look at what existing products could be adapted to integrate this approach and provide blueprints for investment vehicles across different asset classes.

Institutional investors will also be encouraged to work in more innovative vehicle structures by seeing what others are already doing in the market. This includes using blended finance and ways of leveraging grant or concessionary capital to work with private sector capital at scale. We believe just transition financing provides exciting opportunities for public and private investors to work more effectively together.

The G7 Impact Taskforce has allowed us to combine expertise and knowledge from a huge range of influential actors, from way beyond the small group of G7 countries themselves.

We have engaged with multilateral development banks, such as the World Bank, and the world’s largest money managers, such as Morgan Stanley. We believe that this consultation process is part of the bigger collaborative effort across the globe that is required to mobilise private finance in the fight to address the climate crisis.

All actors need to work together to achieve a just transition in the short time remaining to us. Hopefully, the collective commitments coming out of COP26 will make it easier for us to do so.

The writer is chief executive of the UK’s Impact Investing Institute, and a former business editor at the FT

 

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More Climate Technology Investment Is Needed to Get the World to Net Zero – Bloomberg

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Vast sums are now pointed in the direction of reaching net-zero emissions by 2050. That’s good news: We require somewhere between $100 to $150 trillion in climate investment over the next three decades, and ignoring global warming would prove a costly and potentially irreversible cataclysm. In fact, the crucial coming years need to see sums going into the energy system to more than double from the current $1.7 trillion a year. But does the promised cash add up to what the planet needs? Not quite.

There’s the inconvenient fact that the cash isn’t reaching every corner of the globe in sufficient quantities. Too much stays in the developed world: That’s a problem, given developing economies will account for nearly 70% of global power demand by 2050. In 2020, 90% of energy transition funding went to high- and upper-middle income economies, according to BloombergNEF.

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Investment Funds Are Pushing EU Carbon Price Higher – BNN

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(BloombergNEF) — Investment funds are piling into the European carbon market for the year-end squeeze. This has contributed to European emissions allowances (EUAs) breaking the psychological price threshold of 70 euros per metric ton ($79/ton) and reaching 75 euros/ton on Nov. 25, 2021.

Speculators can increase volatility and create price spikes if they trade opportunistically. They can also bring stability if they have a longer investment horizon (beyond one year) and invest from a fundamentals perspective.

See the full research report here

©2021 Bloomberg L.P.

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NB Investment Awareness Campaign Targets Scam-Prone Millennials – Huddle Today

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Reading Time: 5 minutes

SAINT JOHN – Millennials are more prone to lose money in financial scams than their elders.

With years of attention paid to educating older Canadians about protecting their money from fraud, it may be surprising that many younger investors have fallen victim to get-rich-quick pyramid schemes, bogus virtual currencies, and more.

Perhaps equally surprising is how New Brunswick’s financial and consumer services regulator feels Millennials are disinclined to take financial advice from a Crown corporation.

“We know this demographic is notoriously difficult to reach,” says Marissa Sollows, the director of education and communications with The Financial and Consumer Services Commission of New Brunswick (FCNB).

In an interview with Huddle, Sollows cites FCNB’s research, in addition to research coming from other provincial commissions, confirming millennial investors are in some cases at higher risk of falling for poor investment pitches or making decisions without the right financial knowledge.

In the first nine months of 2021, 20 New Brunswickers reported losing nearly $711,000 in crypto investment scams, according to the Canadian Anti-Fraud Centre.

“When we started looking at this situation in New Brunswick, it became clear as we saw different trends in DIY investing and interest in crypto and that this was an audience that we needed to try and reach,” explained Sollows.

Not your parents’ investment landscape

Sollows says Canadian investors in their 20s and 30s approach their finances from a different cultural perspective than their predecessors: research shows they are less likely to want to work with a financial advisor and want more hands-on control over their investments.

But Sollows says there is also fear that they don’t know enough about investing and are worried about losing money.

“To come from a regulator, we sort of recognized it wouldn’t work as well for this audience, who get their information from different sources and who have different levels of trust with those different sources,” said Sollows.

In an effort to respond with something meaningful for the Millennial segment, FCNB designed a new awareness campaign that was outside its traditional outreach.  Where social media has hooked young investors on finance, FCNB decided to put more of its campaign resources on YouTube, Twitter and, for the first time, TikTok.

For Sollows, that meant focusing not just on what channels Millennials were getting their financial information from, but also trying to understand how they were interacting with those they perceived as “experts” and where that financial advice was coming from – whether legitimate registered online trading platforms or somebody purporting to be an expert with a hot tip.

“There’s a much higher level of comfort, with the younger generation, with technology and with putting trust in their peers in these different online forums as opposed to going to a traditional financial advisor that their parents would have had more trust in,” says Sollows.

On Nov. 22, FCNB launched “The Right Recipe,” a new investor education campaign targeting Millennials and do-it-yourself investors with resources designed specifically for them.

FCNB campaign videos serve as explainers on a variety of topics–including fad investing, multi-level-marketing schemes, influencer scams, and high-risk investment products–while reinforcing the steps any investor can take to protect themselves and their money.

Do-it-yourself investing is exploding

Covid-19 lockdowns and uncertainty translated into a meteoric rise of online DIY investment platforms and trading apps, leading many to investment possibilities for the first time at the touch of a button. Others are getting their advice on social media and choosing instead to test unconventional methods. But, as Sollows points out, these often “prey on FOMO” (fear of missing out) on advertised payoffs.

The rise of “finfluencers” (a specific type of influencer who focuses on money-related topics) have made full use of platforms like TikTok, Instagram, and YouTube to get the attention of young investors.  Couple that with Millennials increasingly willing to devote cash on decentralized cryptocurrencies and hot stocks – with much of that advice coming at them through social media – and you’ve got a scene rooted in familiar tones.

Interactive Investor, A UK online investment service published a July survey showing more than half of young investors surveyed in the UK who have purchased cryptocurrency like bitcoin or dogecoin have done so using credit cards, or even student loan money.

More unconventionally, users of Reddit have made headlines swelling into pump-and-dump schemes targeting low-cost stocks for small companies.  Money inflating the value today might be worthless tomorrow on a pre-planned selloff, leaving young investors holding pennies of worthless stock days later.

Trendy concepts like “Impact Investing,” where a company gathers investment intenting to “generate measurable, beneficial societal and environmental impact, alongside a financial return,” have gotten young people to invest money for the promise of helping a greater good, which often leads to confusion and no return for the investor.

“It’s the same old scam,” according to Sollows, who says it’s just wrapped up in different wrapping paper with a different story around it.

“We’ve seen this kind of thing happen with ‘green investing’ in the past when renewable energy and so on was becoming really popular. The scammers would follow the headlines and build pitches around it.”

Financial awareness education is evolving

On the flipside, Sollows says there’s a need to help young investors navigate many of the legitimate online platforms out there. She hopes FCNB can be a trusted resource to help Millennials make some of their first investment decisions, especially when going the DIY route.

“The Right Recipe” depicts a fictional brewmaster who has heard a lot of financial tips over the years.

He’ll tell you that everybody knows someone who’s made a bundle in the markets. He figured if his customers could do it, why couldn’t he? The example allows the user to follow his investment journey, for better or worse, through videos.  That journey is everything from “listening to some rando’s advice on social media” to letting “FOMO be his guide” and blindly “following the latest investment trends.”

In addition to campaigns like “The Right Recipe,” FCNB also offers investment updates and fraud alerts emailed directly to those who sign up on its website and provides a variety of financial literacy topics through both in-person and through virtual presentations. Those sessions are offered to workplaces, classrooms, and the broader community, covering topics ranging from financial literacy and budgeting to investing to fraud prevention.

For navigating the investment learning curve and the possible pitfalls for young investors, Sollows believes the campaign would be a success if people used the information and experience of the brewmaster to instead follow their gut instead of social media when the offer seems too good to be true.

“If you’re being offered some crazy returns on things, and they’re telling you, ‘Oh, I can guarantee you’re going to make this much money and it’s so easy you don’t need to understand it — In any other aspect of your life, if somebody said that to you, would you keep the conversation going or would you walk away saying, ‘No thanks, I’m good.’”

FCNB’s The Right Recipe campaign will run until mid-February, in both English and French on most social media platforms and at: therightrecipe.ca.

Tyler Mclean is a Huddle reporter based in Fredericton. Send him your feedback and story ideas: [email protected]

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