This is a crucial question. At present, most green investments and government regulations result in a single outcome: consumers shouldering the cost of climate action through higher prices on goods and services. But is this the right approach? Absolutely not. Shifting the financial burden to consumers is merely a short-term remedy—akin to treating symptoms rather than addressing the root cause.
Let’s take a deeper look.
Economies must ensure sufficient capital is available to fund investments that effectively mitigate the impacts of climate change.
Despite differing theories and opinions, it is now undeniable that businesses and economies must secure capital to fund investments in combating climate change. While former President Trump dismissed climate change as "green nonsense," 97% of the global scientific community agrees that it poses a real and urgent threat to humanity.
However, raising funds for climate action remains a daunting challenge. Political uncertainty, conflicting national interests, sluggish fund disbursement, and a lack of transparency in resource management create significant roadblocks. Achieving climate justice requires a delicate balance between economic growth, social welfare, and environmental protection—a complex and often difficult endeavor.
The real question is whether the necessary funds exist to tackle climate change. The answer is a definitive YES.
Let’s begin with the most important question: Are there the necessary funds to tackle climate change? The answer is definite YES.
Global liquidity available for investment is estimated to exceed $400 trillion, encompassing money in circulation (M2), investment funds, and bond markets. The majority of this capital is privately held. However, only a small fraction is currently directed toward green investments and climate-related projects. This presents a significant opportunity to reallocate capital toward sustainable solutions.
To put this into perspective, the estimated annual cost of addressing climate change impacts ranges between $1 trillion and $1.5 trillion (or euros) by 2050. This means that global liquidity exceeds the required investment by a factor of 250 to 400.
Moreover, these cost estimates already account for the expected benefits of such investments, which are projected to be 1.5 times the initial outlay. In simple terms, investors in green initiatives can expect a return of approximately 50% by 2050, aligning with the Net Zero target. While the finer details matter, they do not alter the fundamental conclusion: the capital exists, and the financial incentives are clear.
But who will bear the financial responsibility? Who will shoulder the greatest burden? And who will take the lead?
Financing the fight against climate change is one of the most pressing and complex global challenges. Many stakeholders are expected to contribute, but the key question remains: Who will shoulder the greatest burden, and who will take the lead?
The key players in the "who pays the bill" debate are:
1. Developed countries
Developed countries, which have historically contributed the most to greenhouse gas emissions, have a greater responsibility to finance the transition to greener technologies and mitigate the effects of climate change. They are often cited as those that should provide financial assistance to developing countries, either through direct financing or technological support. In 2009, under the Copenhagen Accord, developed countries pledged $100 billion per year by 2020 to support developing countries.
2. Developing countries
On the other hand, developing countries, although contributing less to the climate crisis, are more vulnerable to its impacts. They are seeking financial support to address the problems arising from climate change (e.g. floods, droughts, droughts) and to enable them to adopt green technologies without damaging their economic growth.
3. International Organizations
Organisations such as the UN and the World Bank play a central role in providing funding and promoting policies to address climate change. The United Nations has established the Green Climate Fund, which aims to finance adaptation and mitigation actions in developing countries.
4. Private Sector
The private sector, including large companies, banks and investment funds, is a key player in financing the transition to clean energy. Companies are increasingly investing in green technologies such as renewable energy, and many have committed to zero carbon footprint in the coming years.
5. International Agreements and Coal Taxes
Tax measures, such as carbon taxes, may also be introduced, which would be imposed on the most polluting industries and countries, while generating revenue to finance green projects.
While liquidity exists, several challenges persist, including the risks and returns of green investments, political uncertainty, and a shortage of mature, finance-ready projects.
These obstacles can discourage investors, making it crucial to overcome them in order to fully unlock available capital for climate solutions.
Risk and return: many investors, especially private investors, still believe that green investments are high risk or have lower returns than other traditional investments.
Political uncertainty: Uncertainty about the duration of political and legislative frameworks makes it more difficult to make decisions about long-term investments. Constant regulation to over-regulation, changes in governments' views, the "noise" made by the 3% of climate change deniers, make things worse to impossible. Especially in the European Union, Brussels' ability to channel funds is limited. With an atonic Central Bank, Ursula Von Der Leyen's pledge of 800 billion euros to Climate Change seems like a summer night's dream. Mario Dragi recently called for 800 billion a year to modernise the European economy, twice as much as the Marschal plan. A large part of this amount will go towards Climate Change investments. We shall see.
Lack of Sufficient Projects: The responsibility ultimately falls on the decision makers of the economies and their primary drivers—the businesses. There is a lack of mature, ready-to-finance projects, or the existing ones require extensive preparation that often isn't done—or isn't done thoroughly enough—leading to idle liquidity.
A major challenge is that businesses are not accustomed to planning for the long term, particularly for 15-20 years into the future. Executives have not been trained to create 20-year business plans, and in many cases, there are insufficient reliable assumptions to underpin an investment strategy for climate action.
Moreover, the complexity of climate change involves dozens of physical parameters that demand predictions, and current technology doesn't provide the certainty required for such projections. With so much technical uncertainty, how can decisions be made? To add to this, many business leaders view long-term goals like Net Zero and 2050 targets with a sense of indifference—often summarized by the mentality of “who lives, who dies?” This lack of clarity and resolve poses a significant barrier to advancing meaningful action.
Conclusion: Liquidity exists, but clear plans and agendas are lacking. Businesses, for the most part, are waiting for governments to establish programs and frameworks on their behalf. Over the past 5-6 years, governments have been preoccupied—first with COVID-19, followed by regional conflicts but with global impact in Ukraine and the Middle East, and now with the return of Trump-2.
However, the escalating frequency of natural disasters, coupled with the ongoing energy crisis and increasing regulatory pressures—such as the EU’s CSRD—may finally push businesses to act. This moment could be a turning point, as companies begin to recognize that adapting to climate change is not just a moral obligation but a necessity for their medium-term survival.
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