The limitations of voluntary climate commitments from private financial actors

18 January 2023 - Climate Brief - By : Michel CARDONA

(This document was initially published in November 2022).


Private finance will not fund the transition without a stronger commitment from public authorities

  • For several years, and particularly since COP 26, considerable time and attention has been dedicated to the subject of voluntary commitments from private financial actors. These commitments, made within the framework of international initiatives, should in principle enable private finance to be mobilized for the transition to a carbon neutral economy.


  • Such initiatives, however, encounter powerful structural obstacles that limit their effectiveness. While beneficial and worthy of encouragement, we cannot expect these initiatives to deliver more than they are realistically capable of achieving. Indeed, while they can accompany actors from the real economy that are already engaged in economic transformation, they are incapable of making a more decisive contribution to the transition.


  • This observation leads us to call for a stronger commitment from public authorities. Such a commitment, just like that of other economic agents, will be essential to mobilize private finance to support a rapid and organized transition.


According to Mark Carney’s statements at COP 26, the Glasgow Finance Alliance for Net Zero – GFANZ, an unprecedented voluntary coalition of 500 financial actors with $130 trillion in assets – was destined to be a game-changer in financing the transition to a carbon neutral economy.


But can we rely primarily on this voluntary approach? The answer presented in this Climate Brief is no. Although useful and led by people who are truly committed to the cause, we cannot expect too much from these initiatives to mobilize private financial actors in favour of the given the intrinsic limitations to their effectiveness. Conversely, an approach based primarily on the strong commitment of public authorities seems essential.


This public commitment must be based on a wide range of instruments, including financial regulation, whose role is essential when it comes to financial actors.


The first section of this document analyses what we can realistically expect from financial actors in terms of funding the transition. The second section presents the reasons why voluntary private initiatives cannot play a decisive role, despite the impressive volume of assets managed by the actors who have made these commitments. The third section returns to the decisive role of public authorities in mobilizing private finance.



This report is part of the Finance ClimAct project and was produced with the contribution of the European Union LIFE programme. This work reflects only the views of I4CE – Institute for Climate Economics. Other members of the Finance ClimAct Consortium and the European Commission are not responsible for any use that may be made of the information it contains.



To learn more
  • 02/17/2023 Foreword of the week
    Climate transition plans for banks: European legislators on a razor’s edge

    The proposal for mandatory climate transition plans for banks is slowly making its way through the regulatory debate. Proposed by the European Commission and confirmed by the EU Council, this proposal has now also been taken up by the European Parliament. This obligation could be a game-changer for financial risk management and the alignment of financial flows with the transition to a low-carbon economy. It could lead banks to limit their activities in climate-damaging activities, adjust their business models, review their strategies as well as their governance and risk management procedures.

  • 02/16/2023 Op-ed
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    The legislators in Europe are discussing the introduction of mandatory climate transition plans for banks. After the European Commission and the Council, the European parliament has adopted its position. Now trilogue negotiations between the three will begin. While all three seem to agree on the idea itself, differences remain in how these plans are defined. Anuschka Hilke, Director of the Finance program from the Institute for Climate Economics (I4CE), explains in this blog which parameters will be decisive for framing the ambition of this legislative proposal.

  • 11/25/2022 Foreword of the week
    Financial regulators must stenghen their game

    One year ago the creation of the Glasgow Finance Alliance for Net Zero – GFANZ – was announced. The expectations were as big as the numbers: a coalition gathering 500 financial actors representing 130 trillion dollars. Private financial actors were finally stepping in and mobilizing. But one year later, the coalition raises many doubts. On one side it faces criticism from NGOs, and on the other some US actors are considering leaving the coalition under the pressure of members of Republicans Party.  

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