The world’s eyes will turn to Copenhagen today as policy makers from across the globe gather for the United Nations Climate Change Conference. <br /><br />They are faced with a huge – some would say almost impossible – challenge. Achieving any meaningful agreement on the successor to the Kyoto treaty will require bridging national agendas as far removed as Brazil, Britain and Bangladesh. It will also require politicians to remain resolute and commit to deeper cuts in greenhouse gas emissions targets despite many countries facing constrained budgets as they seek to repay the debts accumulated during the financial crisis.<br /><br />But all challenges bring new opportunities and climate change is no exception. <br /><br />Copenhagen has the potential to define the green agenda for years – possibly generations – to come. <br /><br />The scale of the problem, however, demands a globally coordinated response from both the public and private sectors. Investment in clean technology and low-carbon alternatives are required now if we are to avoid greater problems for the future.<br /><br />As highlighted by “Delivering Copenhagen”, a report commissioned by the City of London, the financial services industry can play a vital role in delivering the capital and expertise needed to meet this challenge.<br /><br />But for these opportunities to be realised, a number of steps must be taken and agreed internationally.<br /><br />Firstly, global policy makers must establish a clear and consistent regulatory environment around all aspects of climate change mitigation and in areas such as the carbon market. Before investors part with their cash for clean technologies they must be confident they are basing investment decisions on a secure regulatory framework. The cost of capital is related to risk and politicians must make it a priority to minimise risk for investors by creating policy stability.<br /><br />Secondly, we must also examine how we can use expertise in the financial markets to create new opportunities. Innovation must be encouraged not just in terms of technology, but also in the development of new financing techniques and products such as index-linked carbon bonds, forest-backed bonds and weather derivatives. Green markets are subject to violent fluctuations and a range of sophisticated products are needed mitigate risk and enable investors to hedge their positions.<br /><br />Politicians and the public view innovation with suspicion in this post credit crunch world. In the field of climate change financing, however, it should be encouraged within this secure framework in order to exploit London’s status as a global hub for finance and capital raising. <br /><br />Thirdly, development mechanism reform should also be addressed so bottlenecks, long waits, uncertainty for certified emission reduction credits can be minimised while maintaining transparency and rigorous scientific standards.<br /><br />Copenhagen has the potential to be a pivotal stepping stone towards a better, cleaner world. It is now up to policy makers to demonstrate the necessary political willpower to achieve this vision. <br /><br />A fundamental change to the way we consume and do business is needed to stave off the worst aspects of climate change. The time to act is now. <br />Stuart Fraser is Chairman of the Policy and Resources Committee at the City of London Corporation.