Climate Change Requires Private Sector Financial Firepower

And these efforts cannot be simply country-based. They must be geared to achieve global goals for net zero greenhouse gas emissions.

Credit: Ute Grabowsky/Photothek via Getty Images

Michael Olabisi of Michigan State University explains how the world’s poorest countries, especially those in Africa, are struggling to pay for a climate crisis they cannot afford. He cautions that more public debt is not the answer because climate investment needs exceed the lending capacity of multilateral finance institutions, and many African countries are already in a funding squeeze.

“What’s needed are novel solutions—chiefly stepped-up private sector investment for climate action in poor countries.” “Can we imagine a future when most corporations pursue global ecological sustainability because their economic sustainability depends on it?”

Talking Points:
First, poor countries have limited ability to borrow.
Second, investment needs are beyond the capacity of the world’s multilateral lending and development institutions.
Third, public debt may not be the most effective financing mechanism for some of the most promising climate interventions.

Suggested Solutions:

Climate-friendly finance: In exploring new ideas, one possibility is the supplementation of debt with other financing arrangements that meet the challenge of climate change.

Engaging private markets: The private sector has enough to support the $1.3 trillion a year needed for climate adaptation. Starting with some ballpark figures, the top 500 global corporations earned more than $2.9 trillion in profits in the fiscal year ended March 2023, on revenues of about $41 trillion. For the United States alone, gross private domestic investment was about $5 trillion in the third quarter of 2023. If the corporations making these investments converged uniformly on climate action the US private sector alone could, in principle, fund a global renewable energy transition 15 times over.

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