Finance and Sustainable Goals

Finance and Sustainable Goals

• 1.
  Kick-starting global climate investments Uncoveringhidden links in climate finance and exploring dynamic evolution of investment networks for policy design Dr Nadia Ameli Principal Research Fellow Institute for Sustainable Resources, UCL
• 2.
  2015: All infor a sustainable future The Paris Agreement Making financial flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development The Addis Ababa Agenda A global framework to align financing flows and policies with economic, social, and environmental priorities
• 3.
  • Efficient markets:investments will flow when an profit opportunity in terms of risk/return expectation arises • Rational and informed agents with standard preferences Finance mainly assessed in terms of investments needed to meet the climate targets… because: Motivation: Limited understanding of climate finance (IPCC)
• 4.
  • Heterogeneity ofpreferences • Dynamics of behaviour and learning process • Relationships and influence in the financial system From a neoclassical to an evolutionary perspective
• 5.
  Adaptive System Investment patterns andstrategies evolve over time Macro patterns emerge from observed micro investors’ behaviour and interactions Complex Many heterogeneous investors interacting simultaneously on multiple levels Studying the financial system as Complex Adaptive System
• 6.
  Model the financialsystem as a complex system • Understand the structure of the financial system when it comes to low- carbon investments (e.g. leading investors and architecture of the system) • Explore the financial system’s dynamics and evolution to understand its development, to manage and influence it • Explore what climate policies and regulations are needed to pool long- term financial assets to boost the low-carbon transition Project objectives
• 7.
  Methodology: Network approach Setof actors Set of projects Projected network of actors Projected network of projects
• 8.
  The Paradise Papers
• 9.
  Too Big toFail or Too Central to Fail? Battiston et al. (2012), Scientific Report
• 10.
  The rise ofthe Medici Family Padgett and Ansell (1993), American Journal of Sociology
• 11.
  • Behind eachcomplex system there is a network, that defines the interactions between the components • The structure and architecture of a system always affect its dynamics • Understanding these aspects is vital to monitor/ influence the way such structures may evolve and to identify points of intervention in the system Some reflections on complex systems and networks
• 12.
  Initial results The HiddenStructure of Energy Efficiency Finance Nadia Ameli (UCL) Sumit Kothari (UCL) Giacomo Livan (UCL) Guido Caldarelli (IMT)
• 13.
  The energy efficiencyinvestments worldwide (2000-2017) Number of Transactions Source: Bloomberg New Energy Finance
• 14.
  Cross border flowsof energy efficiency investments (2000-17) Source: Bloomberg New Energy Finance
• 15.
  Energy efficiency investmentnetwork (2000-2017) • Leading investors Utilities Service companies • Hub investors Utilities Governments • Investors’ relationships Utilities & Governments
• 16.
  Evolution, dynamics andinvestment growth • Technologies with existing higher investments tend to attract further investment, but only up to a point • Then technologies’ fitness explains the further investments Rich get richer A technology attracts further investment as a result of existing investments Fit get richer Each technology has intrinsic qualities and inherent attractiveness to investors
• 17.
  Critical points ofintervention to spur green finance • Utilities are the leading investors and preference for smart metering, smart grids and energy storage projects Need for actor-specific policies (e.g. regulatory measures ensuring cost recovery through operational efficiency, setting tariffs reflecting such costs) Stimulate crowding-in processes with more involvement of the public sector especially when a clear business model is lacking (e.g. EE buildings) • Co-investment patterns: public sector acting as hub Understanding systems’ dynamics (e.g. smart grids: combination of public spending, regulations support and technology improvement which increased market confidence in this sector) • Investments’ growth depends on existing investment and technologies’ attractiveness
• 18.
  • Develop quantitativetools and empirical evidence to assess the interplay between network structure and the dynamical processes, and final outcomes • The financial system has the requisite size (financial assets globally worth roughly US$300 trillion), dynamism and global reach to achieve the SDGs SDGs are a complex, long-term investment challenge Account for complexity thinking and systemic perspective
• 19.
  Advisory board: ProfGuido Caldarelli, Prof Michael Grubb, Prof Antoine Mandel Postdoc econometrics Postdoc sociology Postdoc computer science PhD complex systems Climate finance Energy Policy Applied energy economics Econometric modelling A worldwide analysis of low-carbon investments Get in touch [email protected] !