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  • Writer's pictureGustavo 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.



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