As extreme weather events continue to increase in frequency as a result of rising temperatures, Web3 stands ready to address one of the biggest issues impacting the global fight against climate change: the climate funding gap.
In 2009, delegates at the 15th United Nations Climate Change Conference (COP 15) pledged to reach a target of $100 billion in annual climate financing for developing countries by 2020. Nearly a decade and a half later, the amount of actual funding is estimated to be between $21 billion and $83.3 billion – a fraction of the now-estimated $1 trillion needed annually.
Elizabeth Tan is the founder of Intent Capital Group, a financial services firm focused on impact investing, development financing and green funds. She is also the founder and managing partner of Intent Fund, and a Web3 investor and strategy adviser.
Of the financing that is provided, the vast majority comes from governments and institutions in developed countries, some of which use climate financing as a means to greenwash their thinly veiled support for resource exploitation. The result is financing terms dictated by the donor countries and few financing alternatives for developing countries.
The good news is that Web3 can help close the funding gap – and may even allow citizen activists to wrest control of climate finance away from governments and institutions. It can get trillions in retail capital into the space, incentivize a new generation of climate projects and give developing countries alternative funding options.
Onboarding retail capital
A major part of the problem is that climate finance has long been the domain of governments and institutional investors. Retail investors are simply not allowed to participate, despite their $8.2 trillion in untouched “investable retail wealth.”
Evidence suggests that most retail investors would take a lower return in exchange for significant environmental impact. It’s a clear signal that they want to be part of the fight against climate change and invest their money into projects they believe will have a big environmental impact.
Web3 can make that happen. In regulated jurisdictions, it can enable the creation of new financial instruments specifically designed for retail investors. This includes the tokenization of existing climate assets,…
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