Gustavo Bernal Torres
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.