Wall Street’s AI Energy Agenda Bleeds Into Global Climate Talks

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(Bloomberg) — In a few days, the finance industry’s fundamentally altered approach to climate change will be on full display.

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Gone are the days of bankers on bicycles handing out bamboo business cards, as they did in Glasgow for the COP26 summit in 2021. Gone, too, are most of the commitments to net zero alliances unveiled back then. 

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In fact, this year’s COP30 summit in Brazil will be conspicuously free of top-level bankers discussing how to cut their financed emissions. Instead of fretting over 1.5C, Wall Street is now laser focused on meeting demand for energy supply and energy security.

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And that may end up being “a stronger motivation for the transition than the environmental concerns that preceded it,” says Jenn-Hui Tan, chief sustainability officer at Fidelity International.

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The development, which in large part is driven by Big Tech investments in data centers to power artificial intelligence, means a lot more money is now flowing into renewable energy. At the same time, those flows aren’t enough to protect populations from the worst fallout of climate change.

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The reality is there’s “a wide gap between annual investment today and the levels needed to materially reduce future economic losses caused by droughts, hurricanes, storm surges and rising sea levels,” said Rahul Ghosh, a managing director and global head of sustainable finance for Moody’s Ratings.

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Capital allocations to the green economy are actually up, and clean energy stocks are enjoying a rally this year that’s left the Nasdaq 100 Index, the S&P 500 Index and the MSCI World Index far behind. 

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On the fixed-income side, banks are making more money providing loans and underwriting bond sales for green-related projects than they’re earning from fossil fuel companies.

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But even with market indicators suggesting that green assets have hit their “glory days,” the rise in temperatures is set to surpass 2C, according to Aniket Shah, global head of sustainability and transition strategy at Jefferies.

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“We’re going to miss most of our targets around decarbonization,” he said.

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Even Bill Gates, the billionaire philanthropist and long-time climate advocate, says it’s time to shift focus. In a headline-making memo sent on Oct. 28, the co-founder of Microsoft Corp. said that climate talks in Brazil should be about how best to adapt to reality. 

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The COP30 summit offers “a chance to refocus on the metric that should count even more than emissions and temperature change: improving lives,” Gates said. And, importantly, he added, “more energy use is a key part of prosperity.”

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Much of the summitry at COP30 is set to focus on climate adaptation. But as things stand, adapting to the physical fallout of a hotter planet is currently an area that’s dangerously underfunded, according to a report published on Oct. 29 by the UN Environment Programme.

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Private capital will need to play a major role in filling the gap. But that will largely have to take the form of so-called blended finance. And here, too, estimates show that deals combining public and private capital are stalling at alarmingly low levels.