New York ranks number 1 in the world in the Global Financial Centres Index (GFCI). Its stock exchanges host companies with a market capitalisation of over US$50 trillion, over 8 times - or the best part of an order of magnitude - larger than the next largest rivals, such as Shanghai and Tokyo. It is the only global city that currently ranks in the top 5 of any measure of financial centres, whether as a hub for capital flows alongside London or for green finance alongside Singapore. 16 years ago, American stockmarkets represented less than 40% of the world’s total stockmarket capitalisation. Now they represent more than 60%.

This year, the 16th New York Climate Week, held at the same time as the UN General Assembly, felt an order of magnitude larger than anything that came before it. The Javits Centre transformed into a hub, the Nest Climate Campus, drawing in thousands. People convened in plenaries, at conference stands, at breakfasts, lunches and dinners, in conference halls, hotels, restaurants, cafes, breweries and even parks. At least 600 decentralised events took place, hosted by financial institutions, companies, NGOs, the UN, and media including the Financial Times, the Economist, Newsweek and the Independent, which launched its inaugural Climate 100 List of the world’s leading environmentalists, in which I was honoured to be included.

The scale of the event was another manifestation of years of growth of green and sustainable financial markets and regulations. But it was also an opportunity to reflect on turning and inflexion points. The upcoming elections in the United States and party-political regime change in the UK and other financial centres creates a series of critical questions over the direction of capital and momentum for the years ahead. On the international political stage, New York, at least for the private sector, appeared to alternate for COP29 this year, which is held in the less accessible Baku, Azerbaijan. One major climate NGO told me that its funding for 2024’s event was 10x 2023’s.

If ever evidence were needed as to the availability of capital for the clean energy transition, at least in the developed world, then New York Climate Week delivered boxes of it. Funding from the United States’ Inflation Reduction Act is being despatched at pace and most of it appears likely enough to survive the upcoming elections, despite at least 42 efforts to repeal it in Congress to date. Europe and the UK have unveiled new multi-billion-dollar funding packages, while China announced its biggest economic stimulus package since 2008. Albeit with more time and effort, new records are being set for private markets fund-raising, while the universe of public markets opportunities continues to expand.

Alongside the policy debates, New York Climate Week convenes the financial (including investors, lender and companies) with the physical (technology and engineering solutions providers). An encouraging conclusion is that both appeared to be in abundance. Business involves solving problems, and solutions to climate and environment challenges involve multi-trillion-dollar markets. Investment involves identifying inefficiencies in markets and energy markets are, to say the least, rife. While most technology that we need for the clean energy transition exists today, A less encouraging conclusion is that communication does not. 

Indeed, one of the largest funding gaps that appears in need of being closed is in the dialogue between public and private sector. While public sector organisations claim to have identified billions of projects in need of financing, availability of capital is often lamented. In many cases, the problem appears to be at least as much in whether or how the capital markets are approached and communicated with. Finance is not one product but a range of solutions, quite often bespoke, and designed by units of specialists. A crude analogy would be a department store. The luggage department will not help you buy shoes. Better communication can help create the store guide.

And there are limits. Particularly in extraordinarily difficult geopolitical and economic times, with expanding fronts of conflict and ballooning budget deficits, there is increasing competition for public capital to address immediate challenges versus longer term investment in climate change mitigation. There was a sense at the boundaries of the climate finance movement that the case for cost-benefit of investment in the short term was struggling. If this was the case for developed or Western economies, this was more so for developing and Eastern economies. Asia, it seemed, was under-represented, while developing countries levelled at developed nations for the debt they owe for past emissions. While the temperature of frustrations may continue to rise if current climate investment fails to deliver greenhouse gas emission reductions, complainants may grow even more frustrated if they knew fully how much of present-day emissions are from energy wasted.

According to data from Bloomberg New Energy Finance, it took around 16 years for investment in the clean energy transition to increase 10x, an order of magnitude. (This is about the same amount of time as is needed to open a new copper mine (copper being a key conductor for the energy transition), to commission a nuclear power station, and it can take nearly this long to fully develop an offshore wind farm, or these days, to get a grid connection in West London). As I set out in this Substack series and in my book, ‘The Edge’, most of this investment was in renewable energy and the grid. But however welcome and needed, given that global energy demand continues to grow, this investment has done little to displace the use of fossil fuels, reduce greenhouse gas emissions, or improve energy affordability or energy security.

At every event, I asked a similar question. Did people (government or private sector) know that most energy is lost or wasted? There were two potential answers. The first, which was the most prevalent, was ‘no’. In a sense, this was the better or at least more acceptable answer. That’s ok. I don’t know how a record player really works, so I suppose it’s understandable that people don’t know how energy is lost in the extraction, conversion, generation, transmission and distribution processes. But the fact of the matter, is that most of it is. And we can do something about it, which is a critical opportunity. The other potential answer was ‘yes’. In a sense, this was a more difficult answer, because it implied that losing or wasting most of the world’s energy is acceptable, which it is not. Neither from a climate perspective, nor from a cost or energy security perspective.  

To address the problem, as new reports from the Rocky Mountain Institute (which estimates that the two-thirds of global energy production that is wasted costs $4.5 trillion per year), the International Energy Agency and our own work at SDCL attests to, a much greater emphasis is needed on efficient and decentralised generation of energy, or what I refer to as ‘EDGE’ solutions. Not only does energy efficiency (think LED lights and improved HVAC systems) and decentralised energy (think on-site solar and storage, ground and air source heat and cogeneration) represent the largest and fastest sources of greenhouse gas emission reductions, it also represents a key to improvements in economic productivity and competitiveness, and energy security. It is good for the environment and good business. As ambition confronted reality, our assertion that ‘if it’s not commercial, it’s not sustainable’ appeared to resonate with both public and private sector as we showcased the example of our new ‘London Edge Fund’ collaboration launched with the Mayor of London, which aims to decarbonise London’s buildings, industry and transport by placing efficiency first.

New York is a poignant venue for discussing climate solutions. It remains the world’s pre-eminent financial centre. It is host to the United Nations. It is a hotbed of creativity, human ingenuity and innovation. And it also embodies the fundamental challenges that need to be addressed at this stage of the climate debate. Indeed, in New York City, the biggest problem in the energy sector is hidden in plain sight. Buildings account for around 70% of New York City’s energy consumption. According to the United States Department of Energy, some 30% of this energy is wasted, for example through inefficient heating, cooling, ventilation and air conditioning, lighting, building management systems and controls, and insulation. These are solvable problems. 

So next time you take a walk down the streets in New York City, spare a thought for its vast underground steam network, over a century old, which provides heating and cooling to over 1,500 commercial and industrial buildings facilities throughout the City and under its streets. The steam comes from a network of steam plants that tend to burn fossil fuels such as natural gas, fuel oil or sometimes coal. You may see it leaking from pipes or vents and escaping through the street, sometimes through manholes, into the air. You may see it piling out of steam vents in the street, which allow it escape to prevent pressure build up. The sight is, and has been for a long time, iconic. But think of this. That heat rising is an everyday symbol of what is happening to most of the world’s energy, drifting up into the air and then into space. 

Much of capital and technology for the energy transition is now at the table. Now we need much better communication and another order of magnitude of focus on efficient and decentralised generation of energy if we are going to gain an ‘edge’ in the energy and climate debate. 

Picture credit: Shutterstock

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