by Frederic Blanc-Brude, Director, EDHECinfra & CEO, Scientific Infra
Private markets function on data – but the data to accurately price climate risks in investment decisions is sorely lacking. We must urgently fill this information void or private finance will fail to contribute to climate action.
Since COP26 and the commitment by members of the Glasgow Financial Alliance for Net Zero (GFANZ) to accelerate the decarbonization of the economy, there has been some finger pointing and accusations of cynicism and even greenwashing directed at the financial sector. Still, it is clear that when it comes to taking urgent action to combat climate change and its impacts (Sustainable Development Goal 13), private investors can and do play an important role in the development of projects and products that contribute to climate action.
However, private market actors are often guilty of holding false beliefs about climate change: namely that climate risks are already priced in, and that the impact of anthropogenic climate change can be offset by financing an energy transition. Neither of these views is realistic or fact-based. To be a genuine force for climate action, private markets should focus on the creation of investment knowledge about climate risks that does not currently exist.
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