Since taking office as President Biden’s climate envoy, John Kerry has spent a good deal of his time on the road pushing the private sector to engage on climate change. I’ve heard the argument from him time and again over the last couple of years: tackling climate change will require not only governments but also private capital and private-sector initiative.
That approach was on my mind when I caught up with him this week in Abu Dhabi. Kerry, alongside ministers and envoys from around the world, had traveled there ahead of this year’s United Nations climate conference in Dubai, known as COP28. Their goal was to make progress on key negotiating areas to set the stage for the upcoming conference and work out differences between governments. But the private sector, too, will play a critical role determining whether COP28 is deemed a success—particularly when it comes to finding the trillions of dollars needed to finance the energy transition.
In our conversation, Kerry said that the key to getting private climate finance rests in finding ways for investors to profit. “Money behaves in certain ways. It always has. It always will. It seeks the greatest return on investment, the fastest return on investment, or the best combination of the two,” he says. “The bottom line: is the deal bankable?”
To create bankable deals, Kerry—along with the COP presidency and climate finance experts—are pushing a model known as blended finance. Governments and development banks like the World Bank provide money for projects on generous terms, which then makes it less risky for private investors to provide their capital. Analysisfrom blended finance network Convergence found that on average $1 of public investment can drive $4 from the private sector.The goal of accelerating blended finance has won support from across the climate community, but the money has nonetheless come slowly. A report released last month from Convergence found that last year dollars flowing through blended finance deals hit a ten-year low at a time when it needs to accelerate.Kerry, among others, has made accelerating blended finance a key part of his agenda, but there’s one big elephant in the room. Blended finance requires public money, and the U.S. has struggled to put up its share. Kerry acknowledged as much, linking the challenge of Congressional funding for international climate measures to political polarization that has been on the rise since the 1990s. “Public money has to be part of the equation—and there’s not enough of it. And there hasn’t been enough of it for quite some time,” he says. “That’s a reflection of really tough politics that have been created in our country.”Finance, of course, is just one part of the private sector’s role in the climate talks. Kerry noted that “some people have retreated” from their private sector climate commitments in the last few years, largely the result of inflation and pressure from shareholders. Still, he maintained that “responsible” firms are charging ahead. “They may not talk about it as much, they may not be pushing, but they’re doing,” he says.Controversially, a key industry at this year’s COP will be oil and gas. The COP president, Sultan Al Jaber, is the CEO of the United Arab Emirates’ national oil company, and has made engagement with the sector a top priority. In our conversation, Kerry took no issue with engaging oil and gas companies. “If you want them to do carbon capture storage, you want them to reduce their emissions, you want them to tackle methane, you want to do all these really important things, you’re not going to get them to do it if you’re sitting there talking about shutting their business down,” he says.Of course, a range of other issues loom over COP28. Has the ongoing crisis in Gaza—a relatively short hop from where we sat in Abu Dhabi—slowed discussions? “I really don’t think it has yet,” Kerry told me. What about the debate over phasing out fossil fuels? “In order to phase out, you’ve got to first phase down, phase down is the road to phase out,” he says. “And I happen to believe that the marketplace is in the end going to decide.” Right now, demand is driving fossil fuel production, he says, but long-term market signals suggest that the world is going clean.
The question now is will we get there fast enough? “It’s not clear we will. In fact, right now you would have to bet against yourself,” Kerry says. “We’re trying to turn those numbers around.”
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