Addressing Climate Change Requires Both Public And Private Money

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Addressing Climate Change Requires Both Public And Private Money
Most of the financing for the fight against climate change comes from private sources. But public financiers aren't worried about making a return.

Experts say meeting global climate goals will eventually require trillions of dollars in public and private investments. Both of those funding streams will be important, because each of them is better at different things.

There's a lot more money coming from the private sector. Private climate investment has outpaced public spending every year since 2010. The Bezos Earth Fund is planning to hand out $10 billion in grants, which is more than U.S. agencies spent on dedicated climate research in 2019.

But private climate finance usually comes in the form of investments. Gaia Larsen is a financial expert with the World Resources Institute. She tells Newsy these private funds typically go toward things that provide some kind of return.

"Most of what we see in terms of private climate finance is really private companies investing in climate-friendly activities like solar, wind, or even in making their own investments, companies and their own facilities more resilient to climate change," Larsen said.

Public finance is more likely to assume risk that private funds don't want to, where the return is more likely to focus on plain old public good.

"Public finance can go in and say, 'OK, well, we're going to protect you from a certain degree of loss in these types of investments,'" Larsen said. "It encourages the vast amounts of private finance out there to move more towards the direction of sustainability."

Larsen says private investment will likely still be the biggest slice of funding going forward. The hope is that with the support of public investment, it will turn more of its resources into benefits for everyone.

"It needs to really shift from activities that are not compatible with climate change mitigation and adaptation, and towards ones that are," Larsen said.