This week’s United Nations Climate Action Summit in New York brought forth pledges and proposals, but the financial resources being committed to the problem are puny.
All in, about $1 trillion a year is being spent on financing ways to mitigate or prepare for climate change, according to HSBC estimates. Still, it falls far short of the $6 trillion to $8 trillion a year that the U.N. and other institutions reckon needs to be invested each year over the next decade.
Take green bonds, where companies raise money that they promise to spend on environmentally sound projects. The amount of these securities issued may rise by almost 50% this year and hit a record, the Climate Bonds Initiative estimates. But at $250 billion, this year’s total sold would represent just 2.5% of all debt capital markets. Related funding tools like bonds linked to one or more of the U.N.’s 17 sustainable development goals barely nudge that figure above 3%.
Company finance chiefs often aren’t keen on having to devote the money they borrow to specific purposes, which is what green bonds generally demand. And there’s often no price benefit in issuing green bonds rather than the regular kind. Investors tend not to accept a lower return just because a project is good for the planet.