Climate finance and its governance: moving to a low carbon economy through socially responsible financing?

Climate finance is becoming an important feature of the emerging legal and policy regimes to address global warming. However, the current approach largely confines the financial sector to a transactional agent to mobilise capital for clean energy and to broker emission allowance trading. The sector's potential to leverage more sweeping positive changes in the economy as sought historically through the movement for socially responsible investment (SRI) has been insufficiently acknowledged. Indirectly, by regulating greenhouse gases the legal system is helping to create a business case for investors to respond to climate change threats. However, the potential contribution of SRI to address climate change problems more comprehensively is presently limited owing to inadequate governance frameworks, as well the sector's increasing abandonment of its traditional ethical agenda.