Our lawyers co-authored a white paper with the G20 Sustainable Finance Study Group that calls for the creation of a sustainable collateralized loan obligation market to combat climate change.

Our proposals show how to finance the implementation of the Paris Agreement and deploy nearly US$100 trillion over the next 15 years.

An investment of US$100 trillion in sustainable infrastructure is required over the next 15 years to support the world’s move toward the sustainable economy envisaged by the Paris Agreement under the United Nations Framework Convention on Climate Change. According to the Intergovernmental Panel on Climate Change, a seven-fold increase in annual investment in sustainable energy infrastructure alone—to US$2.4 trillion—is needed if the goals of the Paris Agreement are to be achieved.

London partner Chris McGarry and professional support counsel Mindy Hauman advised the G20 Sustainable Finance Study Group and co-authored a white paper with the Study Group that calls for the creation of a sustainable collateralized loan obligation (CLO) market to support the world’s transition toward a sustainable economy and combat irreversible climate change.

“A new sustainable CLO market is the only mechanism to finance sustainable infrastructure projects at the pace and scale required to achieve the goals of the Paris Agreement,” said Chris. “The capital required to meet the challenge is so large that it cannot be provided solely by banks. There is a clear opportunity for institutional investors, which have access to a deep pool of capital as key participants in the US$100 trillion bond markets, to play a central role in the development and growth of a sustainable CLO market.”

The bond market currently provides little of the overall funding to the infrastructure sector—about 15 percent of the total. The white paper argues that the development of a sustainable CLO market, which aligns the quantity of liquidity with long-term investors, will advance sustainable energy, transportation and other sustainable infrastructure projects. The bond market could provide between US$1 trillion and US$1.5 trillion annually in additional private capital for sustainable projects—half the current annual investment gap.

The G20 Leaders’ Declaration included the following endorsement: “Mobilizing sustainable finance and strengthening financial inclusion are important for global growth. We welcome the Sustainable Finance Synthesis Report 2018, which presents voluntary options to support deployment of sustainable private capital.”

“This paves the way for central bankers and regulators in the rest of the G20 (e.g., China, the UK, EU and Brazil) to get to work in earnest in 2019,” said Chris. “Our proposals show how to finance the implementation of the Paris Agreement and deploy nearly US$100 trillion over the next 15 years.”