MIT Sloan Management Review Article on Economic Incentives Are Key to Driving Sustainability at Scale

When it comes to mobilizing the economy for climate action, most recent progress has been incremental. To come close to achieving the goals of the Paris Agreement, the pace and scale of change must be much more radical. The scaling up we need is not simply a matter of dialing up what we have already begun. What we now need is qualitatively different, and today’s approach won’t get us there.

Merely strengthening disclosure requirements on climate-related data and information could increase regulatory burdens without having a significant productive impact. Regulation needs to be partnered with industrial strategy to create the commercial demand for climate action at scale and for the sustainable finance that is increasingly available. Japan is seeking to do this with a balanced mix of sticks and carrots that is in marked contrast to the approaches of both the United States (mostly carrots) and the European Union (mostly sticks).

About the Author

Satoshi Ikeda is chief sustainable finance officer of the Financial Services Agency of Japan. Simon Glynn is founder of Zero Ideas.

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