Can Financial Value Creation, By Corporates And In Capital Markets, Be Aligned With the Broader Interests of Individuals, Society And the Environment?

On the one hand, capital markets benefit from corporate financial success which, in turn, rests upon a thriving economy. Such a world sees productive employment, resources allocated to meet individual and societal demands and needs, and the economic growth that enables the development of social and physical capitals, ranging from energy, telecommunication and transport, to education, healthcare and systems of regulation, security and justice. While not immediately visible through the haze of news services that focus on crisis and disaster, most countries have seen extraordinary progress on most of these dimensions in recent generations (Rosling et al., 2018).

On the other hand, we are in the midst of a collective, unprecedented crisis, which has economic growth at its heart. This has become widely understood in the context of climate change, as well as increasingly visible through the physical effects of fire, flood, heat and drought. Less well understood, though on the same trajectory as climate change, and amplifying its effects, is the unsustainable depletion of natural resources and the associated loss of ecosystem services. Meanwhile, the effects of all these changes are not felt equally, with economic growth increasingly disproportionately favouring those who ‘contribute’ the most to the problem of climate change and natural resource depletion, while also being least exposed to its effects (Otto, 2025).

So, what needs to happen?

First, let’s understand the economic opportunity here. To illustrate, a future economy in which extreme weather events are increasingly common is less valuable (and less insurable) than a future economy operating with a relatively stable climate. It might seem odd to use the word ‘opportunity’, but such is the decision we face, between an economy with more or less economic value.

Second, let’s not throw the baby out with the bathwater. Corporations and capital markets are central to economic activity globally. They are therefore central to the allocation of capital. And because transition towards a sustainable economy requires capital investment, it also requires a system in which corporations and capital markets are engaged in taking the economy towards the state of greater economic value.

Third, let’s acknowledge and work with the reality that corporations and capital markets respond to economic self-interest. That is how they are designed. They will do the ‘right thing’ if they are rewarded for doing so.

These three points can be interpreted as a call for public policy intervention. If only we could have appropriate regulation, taxation and subsidy, then market failures would be corrected and all would be well. But there is rarely a single, ‘silver bullet’ solution to a complex, shared challenge. Moreover, individual actors – both people and institutions -respond better to agency and opportunity than to control and compliance.

Viewed in this way, the three points also combine to make a case that companies and capital markets can – to a degree – bring benefit to themselves while also benefiting the environment and society. There is economic opportunity, which is precisely the signal to which market systems respond. For sure there are challenges here, for example, associated with collective action and time horizon, yet markets have never stood still. They reward innovation. We might well be in a place where the scale and ingenuity of innovation demanded by society is without precedent. But so too are the potential gains for those on the right side of change. The effective allocation of capital itself calls for innovation in the functioning of capital markets, ultimately better serving the interests of pension fund holders and others.

To be clear, corporations and capital markets offer no more of a silver bullet than governments. Yet they are central actors. And they have agency. And that agency is most effective if combined with an understanding that societal needs create economic opportunity.

References

Rosling, H., Rosling, O., & Rönnlund, A. R. (2018). Factfulness: ten reasons we’re wrong about the world – and why things are better than you think. Hodder and Staughton.

Otto, F. (2025). Climate Injustice – Why We Need to Fight Global Inequality to Combat Climate Change. Greystone Books.

The views expressed here are personal and are not the official position of the ISSB or GSI.