For Mark Carney, a lack of preparedness for climate risks is a serious problem. The former Governor of the Bank of England describes them as "a tragedy of the horizon" — inevitable catastrophes in the future caused by a lack of risk management today.

To avoid Carney's tragedies of the horizon, we need the recovery from the Covid-19 pandemic to be fuelled by the green agenda.

This is not an extreme position to take. Between 2019 and October 2020, for instance, the number of organisations supporting the Task Force on Climate-Related Financial Disclosures, which is a framework for tracking emissions and promoting transparency, has grown significantly: 1,500 companies had committed to the framework by October 2020.

However, there is scepticism about the actions those firms will take to address climate challenges, with many committed to the framework failing to report on their progress. And ING research surveying 450 global corporations reveals that 35 per cent of businesses see their sustainability targets being too far in the future to ensure any meaningful accountability today.

The common good needs motivated businesses

Marieke Blom, chief economist at ING Netherlands, sees the need for coordination to support businesses reach sustainability goals.

As the economy involves complex relationships between businesses, banks, governments and regulators, greater coordination between them all can make sustainability goals feel more achievable – whether that's through frameworks that make reporting on climate progress more robust, or financial solutions that offer targeted means for green transformation.

"You need a lot of coordination to counter those market forces, which, in themselves, are not sustainable," says Blom. "You have to think about not just your own needs, but also the common good."

And that kind of thinking has to last. There is no guarantee, as the world begins to return to some degree of normality, that organisations will stay focused on green matters. What is needed is motivation driven by values.

"In order to change society and the world, you need people who are intrinsically motivated," says Dr Roland Mees, director of Sustainable Finance at ING. "They hold on, whatever happens."

How sustainable finance is doing its bit for the green economy

With the right motivation in place, companies can start to take steps to finance climate-linked projects, and this is where sustainable finance comes in.

Two instruments in particular offer significant benefits: green loans and green bonds. Green loans are typically provided at lower interest rates, with borrowers obliged to communicate their environmental objectives to lenders. Green bonds, meanwhile, offer companies a debt financing option that strongly encourages them to report on the use of proceeds.

These products are becoming increasingly popular. An Institute of International Finance report in July found that sustainable debt sales more than doubled year on year in the first half of 2021 to more than $680 billion, with green bonds making up 35 per cent of new issuance.

One company that has benefited is a mobile network operator Turkcell. It took out a €50 million green loan in 2020, with proceeds directed towards renewable energy projects. The company has also committed to sharing an annual report detailing the exact allocation of the loan.

If companies are serious about tackling those tragedies on the horizon, an uptake of green finance will be just as crucial as being properly motivated and coordinating with everyone involved.

Or as Carney puts it: "We cannot self-isolate from climate change. Rather than confuse independence with sovereignty, we must design a new form of international co-operation to serve the needs of the many, not the few."