The Uses And Abuses Of Green Finance

Why the net-zero pledges of financial firms won’t save the world.

• The reality of green investing falls short of this ideal. The first problem is coverage. The Economist estimates that listed firms which are not state-controlled account for only 14-32% of the world’s emissions. State-controlled companies, such as Coal India or Saudi Aramco, the world’s biggest oil producer, are a big part of the problem and they do not operate under the sway of institutional fund managers and private-sector bankers.

• A second issue is measurement. There is as yet no way to accurately assess the carbon footprint of a portfolio without double counting.

• The third problem is incentives. Private financial firms aim to maximise risk-adjusted profits for their clients and owners. This is not well-aligned with cutting carbon.

Source: https://www.economist.com/leaders/the-uses-and-abuses-of-green-finance/21806111