If there’s one certain thing in these turbulent times, it is that the years ahead will be unlike any others most people have experienced in their lifetimes. Strong forces of political polarization, geopolitical instability, debt-burdened governments, and disruptive technologies and a fourth Industrial Revolution are re-shaping the world order—and drawing leaders’ attention away from climate change. Despite the scale of all these challenges, humanity has never had more resources or better technologies, so it seems in fact the world’s greatest obstacle is how to work well together to overcome “the tragedy of the commons.” Collaborating, though, can unleash a new age of planetary intelligence and prosperity. For that reason, we believe that now is the time for moving past idealism and getting real about how to make it happen.
Let’s focus on climate change. Twenty five years after the first Global Climate Conference in Geneva, society is still struggling to proactively develop adequate mitigation and adaptation strategies. For decades, efforts have been under way to address these issues, but the capital committed from global governments, NGOs, and non-profits so far (roughly $1 trillion per year) is estimated to be only a sixth of what is required.
Why is that and where can the needed funding come from? To answer that we must be practical. Governments certainly don’t have extra money and are experiencing internal fighting over deficits and taxes. Banks and financial institutions are obligated to provide returns for their investors and profits for their shareholders. What about philanthropic funding? In 2022, less than 2% of the $811 billion in global philanthropic giving went to climate mitigation, but with the growing urgency of the climate crisis, philanthropic institutions are signaling greater ambition to mobilize more funds where they’re most needed. Institutional investors, meanwhile, command the largest pools of global capital (roughly $120 trillion) and are uniquely positioned to invest in this area. But today, less than 0.5% of this capital goes into climate finance. This is largely because these funds have financial obligations to citizens, pensioners, and other stakeholders, so they need decent returns on their investments. So far, climate investments have been too risky. But that can change if we take an innovative approach to financing.
The World Economic Forum was founded in 1971 with the vision of public and private sectors coming together to solve complex challenges regarding global public goods. This vision is more relevant now than ever. In an increasingly fragmented world, it has become imperative to have renewed hope and re-imagine new models of collaboration to unlock something bigger than the sum of its pieces.
Overcoming this financing barrier will involve building collaborations between public, private, and—increasingly—philanthropic efforts to catalyze technological advances and attract investments. This can happen in a variety of ways, including grant-making, seed capital, research, technical assistance and project preparation, support for designing community and civil society engagements, de-risking private investments, and even being a part of capital stacks in the form of junior equity.
We have seen the catalytic impact of this kind of public-private-philanthropic effort first-hand through our shared commitment to World Economic Forum’s new GAEA (Giving to Amplify Earth Action) initiative, where we both hold co-chair positions, and regarding ocean innovation and conservation which Ray has closely watched through OceanX, the science, media, and exploration non-profit he co-founded in 2018.
As just one example within marine science, the emerging study of e-DNA shows tremendous promise for understanding marine ecosystems and species migration without relying on visual sightings or more disruptive sampling methods. Six years ago, this area showed promise but was hindered by inefficient automated sampling technologies. OceanX’s philanthropic support of the first U.S. National Marine eDNA conference in 2018 and research at Johns Hopkins sparked key breakthroughs in ocean water sampling, leading to widespread interest and development of this technology. And this year, the United States has published its first National Aquatic e-DNA Strategy to enhance coordination across conservation science, entrepreneurial enterprise, and philanthropic, public, and private investments. Likewise, the Schmidt Ocean Institute’s early philanthropic funding of Saildrone technology has led to a robust industry of low-carbon, autonomous vehicles that are helping push the boundaries of scientific knowledge by providing droves of low-cost mapping, marine life, and climate data. It’s clear that, working together, philanthropists, innovative scientists, venture capitalists, and governments make a powerful, mutually-supportive combination.
Other successful models of public-private-philanthropic partnerships over the past decade have demonstrated the transformative potential of such efforts. This includes Bill Gates’ Breakthrough Energy, which tackles green premiums and builds a compelling case for investors to help new innovative technology companies succeed and scale by using philanthropic dollars to pave the way, and the Three Cairns Group and Sea Change International Foundation’s Allied Climate Partnerships, which use catalytic philanthropic dollars to increase the number of bankable, climate-related projects and businesses in emerging economies. These partnerships harness the strengths of each sector: the innovation, efficiency, and capital of the private sector, the regulatory, funding, procurement, and purchasing power of the public sector, and the flexibility and mission-driven focus and catalytic, flexible, and agile seed capital of philanthropy.
While we must keep in mind that philanthropic money is still a scarce and limited resource that cannot replace private investment, when used strategically in these ways, it can play a truly catalytic role bringing in institutional investors and governments that might otherwise shy away from perceived risks. By providing initial funding and proof of concept, philanthropists can help create an enabling environment that encourages larger-scale investments. Moreover, development finance institutions and multilateral development banks can amplify these efforts by aligning their resources with philanthropic dollars and private investors.
There is no escaping the costs of climate change, which have so far proven difficult to fund. But we believe that it is possible to compete for the necessary funds by figuring out with philanthropists and investors how to produce the returns that will get investors off the sidelines and invest in what’s required for the common good.
Professor Klaus Schwab is the founder and chairman of the World Economic Forum, and Global Co-Chair of GAEA, a multistakeholder platform aiming to design public-private-philanthropic efforts to unlock climate and nature investments.
Ray Dalio is former founder and chief investment officer at Bridgewater Associates, and is currently chair of Dalio Philanthropies, and Global Co-Chair of the World Economic Forum’s GAEA effort.
The post Radical Collaboration Is Needed to Boost Funding for Climate Action appeared first on TIME.
