This article was originally published in Journal of Investment Management (JOIM) in English in Fall 2021, and China Journal of Investment Management in Chinese in August 2021 by Yu (Ben) Meng, Ph.D., Executive Vice President and Chair of Asia Pacific. The piece appears in JOIM’s “Insights” section, which offers unique perspectives from the leading minds in investment management.
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.