a “very profitable” investment for the private sector, says François Gemenne

Every Saturday we decipher climate issues with François Gemenne, professor at HEC, president of the Scientific Council of the Foundation for Nature and Man and member of the IPCC.

For François Gemenne, the government will have to take up a challenge to continue the ecological transition with empty coffers, because “the transition is above all a matter of investment”he said. The report written last year by economists Selma Mahfouz and Jean Pisani-Ferry, which gathered a broad consensus, put the investment needs for France at 66 billion euros each year. The European Commission estimates the investment needs of the Green Deal at around 3.5% of European GDP each year, “these are considerable sums”, insists the professor.

And he recalls that Mario Draghi, the former Italian Prime Minister, former President of the European Central Bank, said clearly in his recent report on the future of the European economy: we must invest massively, particularly in renewable energies, otherwise European companies will have no chance against their Asian and American rivals. “It’s an existential question for the European economy”he insists.

franceinfo: What can a State do when finances are in the red? Is he borrowing?

François Gemenne : This is what Mario Draghi recommends, just like Selma Mahfouz and Jean Pisani-Ferry, but politically it is very complicated: many countries are very reluctant to the idea of ​​a European loan, starting with Germany and the Scandinavian countries. And in France you know very well the debates that this provokes. But doing nothing is not an option, so we will have to find solutions elsewhere. And one of these solutions is to call on the private sector to find the money.

Why should it be up to the private sector to finance the transition?

In fact, it’s very profitable, the transition.

“Socially responsible investments (SRI) today offer rates of return that are completely comparable to traditional investments.”

François Gemenne

at franceinfo

However, there is a huge amount of savings in France, between 6,000 and 8,000 billion euros. For life insurance alone, which is the preferred investment of the French, we have outstandings of around 1,800 billion euros. It is obviously a little difficult to imagine these amounts, but to give an order of comparison, it is approximately the equivalent of the sum of total investments in carbon-free energies in 2023, for the entire world. So there are really ways to do a lot of things with these savings, a very small fraction of which would be enough to finance the transition.

But why don’t we do it, then? Is all this money sitting in the banks?

Money doesn’t sleep, of course. Savings finance businesses and the economy as a whole. But it also finances, in part, the fossil economy. A considerable part of this savings finances oil or gas drilling projects, or deforestation… often without the knowledge of savers, who often have very little interest in what their savings finance. And often the banks don’t help them much to get interested in it.

So this money could finance the transition?

Exactly. First, there are new banking players appearing on the market, with new investments, to redirect individual savings towards the transition. And then there are the SRI funds, which we have just talked about, which are also supposed to provide resources for the transition. The problem is that we don’t subscribe to it enough.

Yet you say they are profitable?

It is also linked to a problem of trust, and trust is important for investment. Sometimes we imagine that these funds are less profitable, and that by subscribing to them, it’s a bit like giving money to an association. We’re wary of what’s inside, too. And it’s true that, until the reform of SRI funds last year, we sometimes found anything there. Fortunately the reform has brought some order to all that. The symbol of this lack of confidence, for me, is that even public utility foundations do not subscribe to it.