Are We at the Inflection Point of Climate Investing?

Vol. 19, No. 4, 2021

Yu (Ben) Meng

Just as the ongoing pandemic demonstrates our vulnerability to the invisible hand of the COVID-19 virus molecule, the extreme climate events are constant reminders of our vulnerability to another molecule, carbon dioxide. As a result, all walks of society are asking for solutions, especially ones that involve the financial markets playing an important role. This emphasis is reflected in the proliferation of ESG investment funds and the massive capital inflows into such funds. This article examines both the demand for and supply of such climate investments and identifies two necessary conditions for private capital to become a meaningful part of the solution to climate change: mandatory data disclosure and alignment of interests via carbon pricing.