Activists dressed as debt collectors hold cutouts of world leaders during a demonstration at the International Monetary Fund headquarters to ask rich nations to keep their commitment to support developing countries in tackling climate change, in Washington on October 13. Photo: AFP

COP26 is being seen as the climate conference to end all climate conferences because it is supposedly the last chance for governments to get real on carbon emission targets. But the Glasgow summit will need to recognise that governments have neither the money nor the power to do this.

What is critical to the meeting’s outcome is not that governments of advanced and developing economies should come up with stricter – and largely meaningless – emission targets but that they should agree to organise a joint approach between the public and private sectors.

Pillars of the financial establishment such as Wall Street titan Larry Fink, head of BlackRock, are coming round to this way of thinking. In a recent New York Times opinion essay, he urged governments to “design new financial institutions to deploy capital to fight climate change”.

Either that, Fink added, or they must “reinvent existing multilateral development banks” such as the World Bank. They must do this, he argued, because private and public financial institutions are not mobilising anywhere near enough money to get the job done in time.

Former World Bank chief economist Joseph Stiglitz has said much the same. “A new global climate institution could both manage risks better, catalyse projects, and help facilitate a significant increase in the flow of funds that will help the emerging markets economies, developing countries face climate change,” the Columbia University professor suggested.

It is not only developing nations – China and India especially – that need such intervention, however. The United States, Japan and Russia are also at the top of the big league of carbon dioxide emitters.

Even advanced economies lack the authority and institutional structure to marshal funds behind saving our planet from the ravages of global warming. There is no global climate tsar to oversee economic transformation. No one is in charge – and that is a recipe for confusion and disaster.

This has been highlighted as the world finds itself facing a “winter of discontent” with global power shortages looming. China has been forced to step up coal output, rather than reducing it in line with the fight against climate change and the nation’s pledge to cut emissions.

For this reversal, we should blame not only China but the uncoordinated rush by many nations to cut coal and nuclear power generation while relying on still-inadequate supplies of natural gas and alternative energy such as solar and wind power. Global energy shortages and soaring prices are the result.

The world is putting its faith in COP26, yet such gatherings are in reality a cop-out because they do not recognise the need for concerted action. Countries are no more capable of acting alone in the borderless world of climate change than companies.

Despite this, the COP process continues to rely on emission-cutting pledges by individual nations, while corporate action is confined to company-level sustainable investment.

From 2004, when then UN secretary general Kofi Annan launched the idea of environmental, social and corporate governance (ESG) investment, to 2015, when he announced the Sustainable Development Goals (SDGs), and after that, the world has been merely dancing around the climate battle financing issue.

Trillions of dollars have poured into ESG mutual and exchange-traded funds from investors eager to aid the climate fight – encouraged by fund managers who earn very tidy commissions on sales of such funds.

A whole industry sprang up around ESG with not only asset managers but also rating agencies, analysts, lawyers, accountants and others benefiting. ESG has been hitched to the SDG bandwagon which also encourages investors to get on board in the hope of halting climate change and “doing good”.

Almost anything labelled “green” – be it ESG, SDGs, impact investing, ethical investing or whatever – is eagerly sought after by investors and vigorously promoted by asset managers. But it is little more than a diversion.

That people like Fink are urging intervention by multilateral development banks such as the World Bank is tacit acknowledgement of this, given that BlackRock, Vanguard, State Street and others have untold billions invested in ESG stocks and sustainable investments.

They may have their motives. The entry of multilateral development banks into the climate change battle on a much larger scale could bring organisation and resources into what is a largely uncoordinated exercise, especially if these banks can structure, guarantee and monitor project pipelines.

One example is the decision by the Asian Development Bank to join Citi, HSBC and Prudential in a joint venture to cut emissions. This aims to help developing Asian nations shut down coal-fired power plants early and replace the lost output with renewable energy.

Given such solutions, the trillions of dollars of private-sector financial assets currently flowing into nebulous forms of climate and other social investment would have a much better chance of producing concrete solutions. This is the only way that COP26 can hope to get real.