Green finance has become one of the central narratives of our time. It promises a reconciliation between capital and ecology, between investment returns and planetary boundaries, between financial performance and the protection of the living world.
The story is seductive. If capital created the industrial machine that destabilized the climate, capital can now be redirected to repair it. If finance amplified fossil growth, it can now finance the transition. If markets are powerful, then they can be made green.
But this narrative rests on a dangerous illusion: the idea that the ecological crisis can be solved without changing the deeper logic of accumulation, debt, growth and monetary creation. It assumes that the same financial architecture that accelerated extraction can be repainted and used to regenerate the world.
This is not a transition. It is a theatre of transition.
The promise of green finance
Green finance includes a wide range of instruments: ESG funds, green bonds, sustainability-linked loans, carbon markets, climate ratings, taxonomies, impact investing and transition finance. Each instrument claims to channel capital toward activities considered more sustainable.
In principle, the idea seems reasonable. If some activities destroy the climate and others help reduce emissions or regenerate ecosystems, capital should move away from the former and toward the latter.
But in practice, several problems appear immediately. Who defines what is green? Who verifies the impact? What happens when a company has both destructive and less destructive activities? Can a financial product be called sustainable if it merely chooses the least bad firms in a destructive sector? And above all: can a system designed to maximize returns become the guardian of ecological limits?
ESG: the art of looking better
ESG ratings are often presented as objective measures of environmental, social and governance performance. But they frequently measure a company’s exposure to ESG risks more than the company’s impact on the world.
This distinction is decisive. A fossil-fuel company can receive a relatively good rating if it manages regulatory, reputational and governance risks effectively. A company can therefore be “ESG-compliant” because it is protected from ecological risk, not because it protects ecosystems.
The result is a confusion between risk to the company and risk caused by the company. Finance sees the world through the balance sheet. Ecology asks what happens outside the balance sheet.
Green bonds and the problem of additionality
Green bonds are debt instruments supposed to finance environmental projects. They can be useful when they fund genuinely additional activities: energy renovation, public transport, ecosystem restoration or low-impact infrastructure.
But the market often suffers from weak additionality. A company may issue a green bond for a project it would have financed anyway, while continuing destructive activities elsewhere. The label improves the issuer’s image without transforming its business model.
Even when the project is real, green bonds remain debt. They must be repaid. They therefore remain embedded in the growth imperative. A project can be ecologically useful, but if it is financed within an architecture that requires perpetual returns, it does not automatically change the systemic direction.
Carbon markets: pricing the symptom
Carbon markets attempt to reduce emissions by putting a price on carbon. The idea is that if emitting becomes more expensive, actors will emit less. This logic has some relevance, but it becomes dangerous when it is treated as sufficient.
First, carbon pricing does not capture the full complexity of ecological degradation. Biodiversity, soil fertility, water cycles, chemical pollution, land-use change and social impacts cannot be reduced to a single carbon price.
Second, carbon offsets often create the illusion that emissions can be neutralized elsewhere. A company continues to emit while financing projects supposed to compensate for the damage. But many offsets are uncertain, temporary, double-counted or based on counterfactual assumptions.
Third, carbon markets preserve the right to pollute for those who can pay. They transform ecological limits into financial variables, whereas some limits should simply be respected.
The trap of green growth
Green finance is inseparable from the broader narrative of green growth: the belief that the economy can continue expanding while becoming clean through technology, efficiency and capital reallocation.
But the material reality resists this story. Renewable energy infrastructures require metals, land, logistics and industrial processes. Electrification requires batteries, mining and grids. Digital optimization requires data centres and energy. Efficiency gains are often cancelled by rebound effects.
The problem is not that green technologies are useless. Many are necessary. The problem is believing that they allow us to avoid the question of total scale. A civilization can be powered by cleaner energy while still exceeding planetary boundaries through material extraction, land pressure and consumption volume.
Finance cannot replace politics
Another illusion of green finance is that markets can do what democratic politics fails to do. Because governments are slow, captured or divided, we ask investors to drive the transition. But finance is not a democratic institution. Its mandate is not to define the common good. Its mandate is to allocate capital under return and risk constraints.
When ecological strategy is delegated to finance, the transition becomes subordinated to profitability. What is not profitable remains underfunded, even if it is essential. Ecosystem protection, care work, public health, soil regeneration and local resilience often do not generate the kinds of cash flows that investors require.
The living world cannot be saved only through bankable projects.
The monetary blind spot
Green finance rarely questions the monetary architecture that produces the growth imperative. It tries to redirect existing capital without asking how money is created, for what purposes, and under what repayment constraints.
If money continues to be created mainly as debt, and if debt requires expanding future income, then the system remains structurally committed to growth. A green portfolio within a debt-growth economy cannot by itself produce ecological sobriety.
This is why the critique must move from finance to money. The problem is not simply that capital is badly allocated. The problem is that the monetary system itself generates pressure for expansion.
What would genuine ecological finance require?
A serious ecological finance would begin by distinguishing between low-impact, regenerative and degenerative activities. It would not merely rank companies within existing sectors. It would question the legitimacy of entire flows.
It would finance the essential even when it is not highly profitable. It would reduce the cost of activities that protect the commons and increase the cost of activities that degrade them. It would recognize biophysical limits rather than treating them as risks to be hedged.
Above all, it would be embedded in a monetary architecture that does not require perpetual expansion. This is the role NEMO IMS seeks to play: to link money creation to the financing of robust social and ecological functions, and to introduce transaction-based demurrage that makes destructive flows more costly.
Conclusion: beyond green finance
Green finance is not entirely useless. Some projects matter. Some tools can help. Some investors can support necessary transitions. But green finance becomes dangerous when it presents itself as the central solution to ecological collapse.
The climate crisis, biodiversity collapse and overshoot are not portfolio-allocation problems. They are systemic problems rooted in production, consumption, energy, debt, money and power.
The task is not to green the financial casino. It is to change the rules of the economy that the casino serves.
Without a monetary architecture oriented toward robustness, green finance will remain what it too often is today: an elegant language for continuing the same trajectory with better branding.