Advocates for private firms (capitalism) to produce “public” goods to solve common problems, like global warming, often seek an “incentive” for firms to produce what they can’t sell at a profit to private customers. One incentive more and more recommended is the reward provided by private investors to private firms which deliver benefits and outcomes valued by those investors.
For example, last November, at the COP26 gathering of leaders, a major announcement was the pledge of the Glasgow Financial Alliance for Net Zero – a global coalition of over 450 finance firms across 45 countries, jointly managing $130 trillion – to align their financing activities to achieve net-zero emissions by 2050. Those asset managers, in theory, would provide financial capital to firms working to achieve net-zero emissions or deny financial capital to those firms not working to achieve net-zero emissions.
Our colleague in The Netherlands, Herman Mulder, with his colleagues at the Impact Economy Foundation, has long been thinking seriously and successfully about how metrics can shape the business models of private firms.
Recently, he shared with me a short essay of his published by the Bretton Woods Committee on how finance could be a game changer in shifting private sector impacts to net positive. You can read it here.