Sheryl Sutherland is looking for investment opportunities in the projects to fight climate change. But if you can't track the money and the outcomes, you will lose money. That's a big problem for the big funders

By Sheryl Sutherland*

In this, my last newsletter for the year, I’ll share with you a headline that shocked me, and then got me pondering – again.  “The World Bank Somehow Lost Track of At Least $24 billion.”

According to Oxfam, the largest bankroller of projects to help continue to fight climate change has an enormous accounting gap.  The accounts lose track of how the money earmarked for climate delivers results.  The report suggests “actual spending on climate projects differed from budgeted amounts, either higher or lower, by 26-43% between 2017 and 2023, resulting in an accounting gap of $24 billion to $41 billion.”

Compare this figure with that of a year of World Bank financing - $43 billion in the 2024 fiscal year.  $41 billion is nearly half of the $100 billion the world’s richest countries have promised to spend annually on climate financing in low-income countries.  The problem, according to Oxfam, is that the World Bank accounts for climate financing at the point of project approval rather than project completion.  Why is this of note?

Well, the World Bank is partially financed by taxpayer dollars from its member countries – you and me.  Additionally, the World Bank also sets standards for its peers.  As Mark Gongloff - a Bloomberg Opinion Editor - points out, although the member countries have vowed to fight climate change, getting actual money out of them is harder than getting a live customer service call.  He further suggests that way too much climate financing is being spent in dubious ways. 

A recent Reuters investigation found that gelato shops, hotels, movies and coal plants are among the many projects that have been paid for by bags of money originally labelled for climate financing.  The $116 billion that developed countries claim to have delivered in 2022 might be overstated by up to $88 billion, according to Oxfam.  The battle to limit global heating to merely disastrous levels has been marked too often by lazy promises and disappointing results, making the long-term economic cost substantially higher.  And here in New Zealand, we are lacking progress.  Minister for Climate Change – Simon Watts – says any increase in funding (following last week’s summit) would be determined by the Government and “no decisions had been made.”  The Azerbaijan conference agreed that additional funding could come from “a variety of sources, public and private, bi-lateral and multi-lateral, including alternate sources.”  I’ll leave you to translate that.

Bill Gates - a long-term activist – believes we are at an inflexion point in the battle against climate change.  He says that the eco-system of investors and inventions has achieved a lot already, developing technologies that are extremely effective at reducing humanity’s greenhouse gas footprint.  Siemens, for example - one of the biggest providers of industrial technology – have a massive real estate footprint, with over 1300 buildings, offices and factories around the world.  Siemens wants to decarbonise its entire business by 2030, and one way is with windows – specifically, new, vacuum insulated windows. This investment will pay itself back in 5-8 years without any offset from tax incentives or subsidies. 

Airlines such as American Airlines are looking at SAF (Sustainable Aviation Fuel).  Gates’ company, Breakthrough, also invests in areas such as carbon removal and building hydrogen-electric engines for planes.  The Clean Industrial Revolution spans every corner of the global economy; green steel, net-zero cement and microbes that convert atmospheric nitrogen fertiliser into a form that plants can use. Each year renewables get cheaper - a good example is that of solar panels.  Last year, China added more solar capacity than the whole world could boast in 2015 when the Paris Agreement was signed.  Change is something you can rely on.

Technology has always been a vital part of the fight to gain control of the climate.  The Economist suggests that it is close to the whole story.  Interestingly, a disproportionate share of the necessary technology comes from China; not just solar panels, but batteries, electric vehicles, and more.

So, it seems to me that the biggest gap in the progress is found precisely in those areas which the World Bank is supposed to be supporting.  While technologically developed countries are battling at ground level, the World Bank said in an email that they recognise “the need to focus…importantly on outcomes – for instance, how much we are reducing the climate vulnerability of people and communities… We value our ongoing engagements with Oxfam and other civil society groups on our climate work and on pushing us to put out better data and be more transparent.”

In reality, the burden of climate change affects women disproportionately; and it’s precisely those who inhabit the poorer economic areas.  Information from the UN Environment Programme states that 80% of those displaced by climate change, are women or girls facing heightened risks of poverty, violence and unintended pregnancies as they migrate to safer locations. 

Women have a pivotal role to play.  It is important to accelerate efforts to protect human health, especially for those most susceptible to the effects of rising temperatures – a tremendous challenge that will require new approaches and accelerated collective action.  A lead from the World Bank would be a good start.

*Sheryl Sutherland is director of The Financial Strategies Group, and author of Girls Just Want to Have Fund$ – Every Women’s Guide to Financial Independence, Money, Money, Money Ain’t it Funny – How to Wire your Brain for Wealth, and co-author of Smart Money – How to structure your New Zealand business or investments and pay less tax. You can contact her here.