What Climate Finance Needs.

Nouriel Roubini

By Nouriel Roubini and Reza Bundy

As we move from UN Climate Week to COP28 in Dubai later this year, we must stop the “greenwishing” and “greenwashing” and start thinking about the instruments that will enable the private sector and private investors to channel more capital toward climate resilience and sustainable development. While the public sector has an important role to play in this respect, scalable solutions require significant commitments of private-sector resources. With climate change already wreaking havoc on poor and rich countries alike, unlocking this largely untapped pool of capital has become an urgent priority.

Yet as matters stand, many investors associate climate-centric investments with “social impact” and reduced profitability. While sophisticated investors have the means to deploy their capital profitably toward decarbonization, the energy transition, and other climate-related sectors, such investments tend to be illiquid. They remain tightly wound up in private-equity funds, and thus inaccessible to the ordinary investors and savers who are most exposed to climate-driven food, water, and energy insecurity.

The solution is to create climate investments that are profitable, liquid, and accessible to all. COP28 offers an opportunity to rethink how we deliver such market solutions, and how we can harness digital innovation to scale up promising models. To mobilize capital at scale, we must draw on the global savings of individual investors as well as institutions such as pension funds, insurers, and sovereign funds. Risk diversification can be achieved through retail-friendly, liquid, easily accessible instruments such as exchange-traded funds (ETFs).

Read the full Project Syndicate article.
Nouriel Roubini is a Professor Emeritus of Economics and International Business and the Robert Stansky Research Faculty Fellow.