What: The Economist addresses the crucial question to know if profit-seeking companies can really help save the planet.

Why this is important: The cost of switching business is extremely high, and might seem deterring for structures which role is to generate long-term value, unless regulations change and make this type of strategies a profitable option.

On the surface, it seems that the answer is positive: $35tn of assets worldwide are said to be monitored through a sustainability lens (+55% since 2016) and ESG has become a common topic among investors, banks and business leaders.

However, there are some clear contradictions: since the goal of a business is to generate long-term value for its investors, it can be tempting to dump some costs (such as pollution) on the society rather than bear them, not to mention potential clashes with regulators and investors in places without a consensus on the climate policy.

For instance, Blackrock is currently being accused in 19 US Republican states to use its market power to boycott fossil-fuel firms, while Democrats consider the company not green enough. As a consequence, financial institutions are becoming worried about signing green alliances as this type of situation could put them under unnecessary strain and tension. CEOs too discover that their words have impacts: JPMorgan CEO has to deny that he is woke following some comments about the company’s social commitment, while Unilever CEO had to step down after not achieving enough compared to his oral commitments.

Lip-service, however, remains cheaper than actual investments: more than 2/3 of the world’s 166 biggest greenhouse-gas emitters have promised to reach net zero by 2050 but less than a fifth have medium-term target or quantified decarbonization strategies.

The Economist argues that governments have to reconcile the goals of profit maximization and a safer climate. In other words: give companies a good reason to save the planet.

The fundamental contradiction of ESG is being laid bare