Ten years ago, Mark Carney, then Governor of the Bank of England, issued a stark warning about what he called the “tragedy of the horizon.” He argued that by the time climate risks truly hit financial markets, it would simply be too late to act. At the time, this message sent ripples through the financial world, with climate advocates seizing on the idea that if climate change could be framed as a financial risk, surely banks and investors would be compelled to move their capital towards solutions. But as of today, October 3, 2025, the reality has proven far more complicated—and, in many ways, disappointing.
Instead of sparking a tidal wave of green investment, the attempt to cast climate change as a financial risk has left the field of climate finance muddled, politicized, and riddled with misdirected efforts. The logic behind the original framing seemed simple: financial institutions, when faced with the prospect of massive economy-wide losses, would naturally steer money toward activities that might mitigate those risks. But as Lisa Sachs, director of the Columbia Center on Sustainable Investment, recently argued in an opinion piece first published on LinkedIn, this premise was flawed from the start.
Why? For starters, “planetary climate risk and financial risk differ in important ways, including in scope and timeframe.” According to Sachs, financial institutions assess climate risks only to the extent that they threaten asset values, earnings, or economic and financial stability—not with an eye toward the immediate and devastating impacts on livelihoods, food systems, or global health. In short, the financial sector’s view is narrower and far more focused on the bottom line than many climate advocates had hoped.
This disconnect has led to mounting frustration. As Sachs puts it, “Climate advocates have seized the framing of climate risk as financial risk but then are exasperated when financial institutions’ assessment of their financial risk differs from the scale and immediacy and profound global planetary impacts of climate change.” The second core problem is that the financial risk narrative assumes that if banks and investors truly grasp the long-term risks, they’ll act now to prevent them. But that’s not how financial markets work. As Sachs explains, “Finance follows markets; it doesn’t create them.”
Take Norges Bank Investment Management (NBIM) as a case in point. NBIM recently estimated that 19% of the present value of its U.S. equity portfolio is at risk under current climate policy trajectories. Yet, as the fund itself made clear, its mandate limits its ability to act more aggressively. In other words, even when the risks are understood and acknowledged, institutional constraints and market structures often prevent meaningful action. The upshot? What really drives financial decision-making is not some distant, abstract risk, but the appetite for—and ability to manage—immediate project-level risks: things like offtake agreements, market volatility, technological uncertainty, and currency swings.
Where markets are well-structured and investable, such as in solar energy, electric vehicles, or digital infrastructure, capital has indeed flowed. But in sectors or regions where transitions are perceived as too risky or unstructured, finance remains on the sidelines. The proliferation of net zero targets, transition plans, and portfolio alignment metrics has done little to help financial institutions truly understand or manage the evolving risks, let alone build the coordinated, investable markets necessary for large-scale decarbonization.
Meanwhile, the real-world consequences of climate change are no longer theoretical. Physical impacts are already disrupting global supply chains, damaging infrastructure, and upending insurance markets. Sachs is clear: “There is no doubt that climate-related financial risks are real, accelerating, and still underestimated.” Investors must anticipate how climate change will affect their holdings, insurers need to price and share risk, and central banks and regulators require new assessments to understand how unprecedented and non-linear climate impacts will ripple through the economy.
Yet, as Sachs emphasizes, “financial losses are just a shadow of the broader social, economic, and planetary consequences already unfolding.” The financial sector must be engaged, but it simply doesn’t have the tools or mandate to coordinate the sweeping transformations required. Instead, the path forward requires a new kind of clarity—especially in emerging markets and developing economies (EMDEs), where the stakes are highest.
Consider the numbers: EMDEs are home to roughly 85% of the world’s population, including over 700 million people who still lack access to electricity. These countries account for less than 20% of current clean energy investment, despite representing 70% of global need. The barriers to investment in these regions aren’t intrinsic; they’re structural. High capital costs, limited access to long-term financing, currency volatility, and a lack of risk-mitigation instruments all serve to hold back desperately needed capital flows.
But here’s the hopeful part: these barriers are solvable. Sachs argues that “financing regional and sectoral transition pathways is eminently doable.” The key is to understand the technological components—like infrastructure, supply chains, and fuel systems—and the institutional enablers, such as regulations, market structures, and procurement models. With that knowledge, public and private actors can design financing frameworks that truly integrate risk-mitigation tools and appropriate sources of capital. Creating investable markets in areas like electrotech and transport could unlock enormous opportunities for both the planet and investors.
While the debate over how best to mobilize climate finance rages on, another controversy has erupted in the world of banking transparency. On October 2, 2025, environmental and shareholder advocacy groups accused Wells Fargo of “greenhushing” after the bank removed several key sustainability reports from its main website. These reports included disclosures on greenhouse gas emissions, net zero alignment, and the bank’s target-setting methodology. Although the documents remained searchable online, their removal from the primary website sparked immediate concern about the bank’s commitment to climate disclosure.
Hana Heineken, an attorney at environmental law charity ClientEarth, was among those sounding the alarm. According to Heineken, Wells Fargo’s actions raise questions about its ability to meet climate disclosure requirements. The incident highlights a growing trend: as regulatory and public scrutiny of climate-related financial disclosures intensifies, some institutions appear to be retreating from transparency rather than embracing it.
All of this adds up to a pivotal moment for climate finance. The tragedy that Carney warned about a decade ago is no longer on the horizon; it’s here, unfolding in real time. But so are the solutions—if the right levers are pulled. Sachs suggests that the only way forward is to “distinguish risk management from capital mobilisation, address the structural barriers that prevent EMDEs from accessing affordable finance, deliberately coordinate public-private frameworks that create investable markets, and complement private markets with public finance.” Only by doing so can we hope to mitigate planetary climate risks today and reduce the financial risks looming on the horizon.
As the world grapples with both the urgency and complexity of climate finance, clarity, transparency, and coordinated action have never been more important. The next chapter will depend on whether financial institutions, governments, and civil society can move beyond rhetoric and risk assessment to tackle the real, structural challenges that stand in the way of a sustainable future.
