A recent summit in Paris brought together world leaders to discuss the urgent need for climate action and the role of finance in addressing the climate crisis. The talks aimed to create a global “financial pact” that would provide poor countries with access to funds for tackling climate change and promoting sustainable development.

Record-breaking droughts, heatwaves, and floods already have disastrous impacts across the globe. The impacts of extreme weather events are disproportionately affecting developing nations, where the majority of reported disasters occur. More than 90 per cent of those who have lost their lives to these events in the last 50 years resided in these vulnerable countries, while 60 per cent of economic losses due to weather, climate and water-related disasters were reported for developed economies.

Developing countries to receive £100 billion of climate finance

One notable outcome of the Paris Summit was the commitment by wealthier nations to reach the long-overdue target of providing $100 billion annually in climate finance to developing countries. These financial commitments are crucial for these nations to invest in clean energy, build resilience to climate impacts, and pursue sustainable economic development.

The biggest challenge for emerging economies is balancing development and the improvement of living standards through economic growth while minimising emissions. Historically, as economies grow and experience increased industrialization and consumption, their emissions tend to rise. Over the past 20 years, while global GDP increased by a total of 145.9 per cent, CO2 emissions increased by 55 per cent per cent. Breaking the link between emissions and GDP growth is crucial to achieving climate goals, given that world GDP is expected to continue expanding at 2.5 – 3 per cent a year over the next two decades.

On the positive side, a number of developed countries have managed to decouple economic growth and emissions. In the UK, for example, GDP has increased by 51.7 per cent since 1990, while emissions have fallen by over 30 per cent. In the US this decoupling has started over the past 20 years. Key challenges remain, however, regarding the extent to which some emissions are being offshored to other countries and whether the speed of decoupling is fast enough to keep us within a 1.5^OC rise in average global temperatures.

Despite global investment in renewable energy sources reaching a record high in 2022 there are still major disparities in renewable energy investments. According to latest IRENA data, 70 per cent of the world’s population, mostly residing in developing and emerging countries, received only 15 per cent of global investment in 2020. In 2021, investment per capita in Europe was 127 times that in sub-Saharan Africa, and in North America it was 179 times more.

Real estate's role

The real estate sector, as a key player, has a vital role in promoting sustainable development and building climate resilience. By aligning with the goals of the financial pact, the sector can contribute to a more sustainable and resilient future for all. Investments in green infrastructure, sustainable and energy-efficient buildings, and resilient urban planning are expected to gain prominence. Within the market, such investments are commonly referred to as being ‘Impact Funds’; Savills is beginning to work with partners to establish, measure and manage some such funds focused on real estate sector assets. 

The emphasis on affordable and climate-resilient housing presents opportunities for developers and investors. Collaboration and knowledge-sharing between donor and recipient countries can lead to innovative solutions. Ultimately, the real estate sector's active involvement is essential in achieving the goals of the financial pact and promoting sustainable development.

Further information

Contact Eri Mitsostergiou

Impacts: Environment