Why we can’t leave it to the private sector to solve the climate crisis

Trillions of dollars of multi-year investments are needed to save humanity from the most devastating effects of climate change

Even companies with social aims won’t risk spending that much on projects that will take years to pay dividends, if they ever do

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A man climbs some stairs on day two of the COP26 global climate change conference, in Glasgow, Scotland, on November 01, 2021. People were beginning to question ESG by the time of the summit as alarm spread at fires, floods, rising sea levels and famines. Photo: Getty Images

Anthony Rowley

Anthony Rowley is a veteran journalist specialising in Asian economic and financial affairs.

Published: 1:30am, 5 Sep 2022

The “cult” – and that’s the best term for it- of ESG (environmental, social and governance) investing as a supposed means to finance the battle against climate change is being increasingly called into question.

Likewise, former Bank of England governor Mark Carney’s “commitment” on behalf of the Glasgow Financial Alliance for Net Zero (GFANZ) to stump up US$130 trillion in investment for the climate fight may not be the panacea it first appeared to be.

No less than the managing director of the International Monetary Fund, Kristalina Georgieva, along with Tobias Adrian, director of the IMF Monetary and Capital Markets Department, have cast serious doubt on whether private firms will risk climate investment without government intervention.

The implications of this could prove far-reaching for the global balance between Western-style market capitalism and Chinese-style state capitalism. Markets have a way of shying away from long-term and risky investments that states have to tackle regardless.

Mark Carney, central banker turned UN special envoy, pictured in London in March 2018. Photo: Bloomberg

We have seen this all too clearly in the case of infrastructure. The private sector was supposed to deliver big time in this area but, when it came to the crunch, failed to do so. China stepped in with its state-funded Belt and Road Initiative, leaving market economies at the starting gate.