An estimated $2.4 trillion a year—above what we already invest—needs to be raised to achieve a global climate transition by 2050, but there are no easy answers to who is going to pay or how the money will be deployed, according to investors, bankers, and members of government who spoke on a panel at the Harvard Business School’s “Accelerating Climate Solutions” conference on May 10.

And there’s a lot of undoing of “old ways” in order to raise and deploy funds fast enough to achieve any climate goals while fairly allocating costs across the globe.

“Convention got us into this problem, it ‘ain’t’ getting us out of it,” Scott Jacobs, CEO and co-founder of Generate Capital, said emphatically.

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Jacobs started his San Francisco-based sustainable infrastructure platform in 2014 with the “simple understanding that the capital markets are broken with respect to solving problems of climate change.”

To accelerate and scale climate solutions, Jacobs told the audience that “you have to build physical projects and operate them in communities. We still lack the people that we need.” Even in the highly developed, highly entrepreneurial environment of the United States, he added, “we just have far too many app developers and far too few project developers.”

A net-zero transition is estimated to cost an additional $2.4 trillion annually from now until 2030, according to Daniel Stephens, a senior advisor at McKinsey. The firm has been crunching the numbers on the costs of economic transformation, including changes in demand and capital spending for the sectors that emit 85 percent of emissions. A big “a-ha” of the McKinsey analysis is the majority of the incremental funding is likely to be debt, not equity.

The experts on the panel expressed confidence that the money can be found through both public and private initiatives in “the Global North,” a loose term for Europe, the U.S., Canada, Australia, and other wealthy countries. Many countries that have committed to legally binding targets toward net zero by 2050. Questions remain, however, for the “Global South,” which refers broadly to Latin America, Africa and much of Asia.

Geography’s role

Member of India’s Parliament Jayant Sinha had sobering words concerning the net-zero transition for the Global South, where most of the world’s population lives. Some countries in this region are just beginning to industrialize, and carbon emissions are increasing.

Sinha talked mostly about India, Brazil, Indonesia, South Africa and Nigeria, the biggest emitters in the Global South. “It’s very, very difficult to see how the Global South is going to get to net-zero, given this massive financing and technology requirement,” he said.

Stephens pointed out that much of the needed new capital is being deployed from a combination of new government spending, multilateral banks, and additional private equity and debt. And while it is clear that funding can be directed for highest impact more easily to certain economies. even a large country like India will have difficulty finding a way to deploy the amount of new global funding needed to create needed reductions in emissions.

“India, by the way, it's 7 percent of global greenhouse gas emissions right now which is about 4 gigatons, 4 billion tons of greenhouse gas emissions,” Sinha said. “And we need trillions of dollars in the Global South as well. But we just simply don't have the money or even the technology to get to net-zero now. We've done a lot of modeling, and in my role as the chair of the finance committee [for the Indian government], we've looked at many different scenarios for our financial system as to whether we can raise the kind of capital that's required.”

Private sector must take the lead

Most decarbonization investments are going to funded by the private sector, according to Sinha. Right now, the private sector invests $65 billion a year in India, he said. Latest modeling shows the need for $50 billion more a year – a nearly 80 percent increase -- to be on a net zero path for 2070.

“This [cost] is obviously going to rise,” he said “That's virtually impossible to do given the state of our financial system. And India is one of the most sophisticated financial systems in the Global South.”

Climate change impacts are already greater in these countries, as they face rising seas, storm surges and increased flooding. And the countries most impacted have historically emitted the least.

“If, for example, most of the carbon emissions going forward will be from the Global South, should the Global South be paying a high price for carbon, when those that have been historic pollutants don't have to pay a price for it?” Sinha asked.

“Wealthy countries have money and the technology to get down to net zero,” argued Sinha. “The inequities at a global level are so stark and so enormous that a simplistic solution which says, ‘Let's just impose carbon pricing’ simply won't work. So, we've got to come up with more nuanced, sophisticated solutions because of the intergenerational equity issues and the geographic equity issues that we're confronting.”

Solutions seen in efficient risk allocation and more stewards

Girish Nadkarni, recently appointed to the strategic advisory board of Clean Energy Ventures (CEV), previously the president of TotalEnergies Ventures, and senior advisor for the alliance called the Oil and Gas Climate Initiative (OGCI), offers more optimism regarding the Global South reaching a net-zero transition. Businesses want to be paid for the systemic risks involved in investing in more challenging countries, Nadkarni said, and that can be a catalyst for progress. OCGI is a group of 12 oil and gas companies leading the industry response to climate change.

“What we have to do to revamp the global financial system is find ways in which intermediaries like the IMF, the World Bank and others can enable private sector institutional investors to shed some of those risks at a reasonable cost-currency risk, policy risk, as well as payments risk. This is, I think, at the core of the issue.”