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Harnessing Private Investor ‘Willingness-to-Pay’ for Climate Change Mitigation

A Mechanism to Co-fund Public Commitments to Achieve the Goals of the Paris Agreement

By Rupert Edwards
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Private investors currently have little opportunity to deploy investment capital on concessionary terms for climate impact. This paper proposes that a significant percentage of social responsible investment (SRI), impact, and many mainstream investors would be willing to pay a modest donation on the nominal value of their investment portfolios in order to support climate change mitigation and associated co-benefits, provided that they felt that their overall returns (minus the fee) tracked mainstream investment performance.

In this working paper, we propose a special platform, referred to here as a Global Climate Finance Foundation (GCFF), enabling private investors across the world to contribute a small voluntary payment to climate change mitigation. The resulting climate investments would be underpinned by government climate finance commitments.

An ambitious capital-raising goal for a GCFF could be $10 billion per annum within five years. It would require a total of $5 trillion in investment assets on which investors contribute 0.20 percent in annual fees to raise $10 billion per annum. Such a sum of $5 trillion is a relatively small share of the $161 trillion in total investors’ assets worldwide and $31 trillion in SRI assets.

Harnessing this willingness-to-pay and achieving momentum would require leadership of respected and senior public figures and philanthropic foundations as well as of CEOs at large investment funds.