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Macroscope | Climate change ETFs, anyone? China’s green bonds show how sustainable investment can work
- The UN has a climate action plan and investors are increasingly heeding the call for sustainable investing, but options remain fuzzy. China’s focus on green finance may be the most pragmatic way to get much-needed funds into climate action
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Everyone (except Donald Trump) seems to be getting worried about climate change – and so they should. They need to worry about the known problem of governments failing to get to grips with the issue and also the lesser known failure of the financial system to deliver solutions.
It is not that the money is not there to help supply solutions; it is more that market economies lack optimally designed vehicles to channel funds into critical areas such as fighting global warming (let alone into dealing with other economic and social challenges).
China arguably has the most pragmatic approach. Even if it does not appear as sophisticated as other advanced economies’ mechanisms for directing savings into the general area of sustainable investment, China’s focus on green bonds does at least provide an easily recognisable target to aim for.
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The urgency of dealing with climate problems is apparent in everything from Australians having to take refuge in the sea from bush fires, the failure of negotiations at the United Nations climate change summit in Madrid COP25, and the charge by Bank of England governor Mark Carney that companies and investors are not doing enough to avert climate change.
As the primary author of a recently published book on sustainable investment, I have become aware that the subject is something of a jungle with no clear way through, and with disasters such as fires, floods, droughts, typhoons and blizzards dogging our every step.
Rapidly growing numbers of investors (no longer just philanthropists and foundations, but legions of pension funds, insurance companies, private equity groups and individual investors) are eager to “save the planet”, but it is not clear how they can do so.
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