This post was edited and revised on 1st July 2025.
At COP29 in 2024, a new collective quantified goal on climate finance was acrimoniously concluded between government parties to the Paris Agreement. Developed-country parties such as the EU, USA and Japan agreed to raise “at least” US$300 billion every year to 2035 for climate action in developing countries.
The source of this money was unspecified but thought to infer funds from governments, Multilateral Development Banks (MDBs), UN climate funds, and private finance [1].
Private finance invokes the private sector:
- “We urgently need the private sector to help step up finance” [2];
- “The private financial sector is a crucial component of achieving our global climate and sustainability goals” [3];
- The climate crisis is too big, too serious and too urgent to rely on the resources of public institutions alone. Today, the private sector manages more than US$210 trillion in assets” [4].
Just like debt, the topic of private finance can quickly become labyrinth.
This overview will stick to exploring the character of private finance and whether it can lower carbon and pollution emissions, thriving biodiversity and climate adaptation for low resourced healthcare.
Private v Public
In its simplest terms, private finance is money that is contrasted with public finance.
Public finance is about government funds, and how these are handled for the development of a country. Public money is obtained and mainly spent locally. Government gets money through taxes, tariffs and loans (national debt).
In contrast, private finance is savings. Savings are made by private entities like businesses and firms that sell goods or services and individuals. Private entities wish to hold onto their savings and grow these through various means like bank savings accounts, insurance policies, stock market investments, pensions, and so on.
Private finance, speaking generally, can be allocated to any type of activity or investment – the phrase does not imply what the finance is used for. Private finance can support building oil rigs, drilling in the Arctic, plastic manufacturing. Or companies that manufacture wind turbines, solar panels, insurers against tropical storm damage, providers of biodiversity credits and so on.
Private finance can be debt or equity. However, since the money is private, the financier wants it back – with benefits. The provider of private finance should obtain some kind of benefit in monetary form. This could range from full return of capital after a period, profits, dividends, or interest payments.
Private also refers to the level of transparency. Private finance deals can be more flexible and quicker than traditional banking or public markets and involve less scrutiny and public knowledge about the intricacies of any deal. All these factors make it much harder to track.
To muddy the waters, there are three other phrases linked to private finance:
- transition finance. Money provided to polluting companies to support them to change their destructive habits. Some argue that this kind of finance delays necessary change and accelerates climate warming [5];
- blended finance. Money from both public and private sources that doesn’t necessarily refer to finance that works for a climate-good outcome;
- sustainable finance. Investment decisions that consider environmental, social, and governance (ESG) factors of an economic activity or project. Whether these activities genuinely mitigate carbon and increase biodiversity is a much debated aspect of greenwashing.
But what is it really?
Ultimately private finance is not an “it”.
Private finance is very diverse. Private finance varies by [6]:
- Where it comes from: for example, from household or company savings, pension funds, insurance funds, or bank deposits…
- It’s legal nature: whether debt or equity.
- Seniority: who is first in the queue for dividends (if equity) or debt repayment. Debt generally gets first-dibs in event of a project failing; and senior debt gets paid back first and can be tied to a physical asset (collateral) for extra safety for the investor. Junior debt may not be tied to a physical asset and get paid out after senior debt – justifying a higher return on investment (ROI).
- Investor expectations of ROI and the relative likelihood of getting money back (risk exposure). There is a truism that the higher the risk the greater ROI should be. However, interviews with financial managers suggest investors are really looking for asymmetrical returns – high ROI with low risk [7].
- The products and services that channel money: for instance, in the form of personal or company loans or credit from a local bank, different kinds of bonds (corporate bonds, green bonds, municipal bonds), investment funds like an index fund or an investment trust like a Real Estate Investment Trust and many more…
- Investor ability to withdraw money quickly (liquidity). Ultimately, investors want their money back so an exit is essential.
- People and organisations involved (actors): such as commercial high street banks, large national banks; pensions providers, investment house, wealth management companies, venture capitalists or angel investors…
- Timeframe; whether short, medium or long-term.
A defining characteristic of private finance is therefore DIVERSITY and COMPLEXITY.
The ultimate beneficiaries of private finance – whether sustainable, blended, or transition – are the investors.
‘Green’ private investors may seek to genuinely engage with making the planet cleaner and more biodiverse, but the fundamental focus is for a profit and acceptable ROI. I say ‘acceptable’ here because even private impact investors who wish to deploy savings in ecologically beneficial or socially supportive ways, are still seeking an ROI. Their acceptable ROI may be lower than commercial private investors though.
This need to generate an acceptable ROI limits the ability of private climate finance to scale. Every deal (project) has to make three returns:
- return of capital;
- return of interest or dividend (i.e. a rent price for using that capital);
- green return (greener energy, increased biodiversity etc.,) [8].
Creating and innovating new ways to use private finance to support sustainability and climate goals is still part of the financial system that was part of creating the world we are in now: private climate finance does not promise radical change of the international financial architecture.
“What applies to ‘private finance’ in a broad sense applies…(to) ‘private climate finance’… private climate finance can take as many shapes and forms, and materialise in as many ways as private finance” [6]
And there are capacity constraints on private finance. Private finance actors themselves possess limits in their own ability to actively manage massive volumes of finance in a way that makes “long-term debt issuance sustainable” [8] and enable repayment. The public sector, ideally a green public sector, is still essential even with ethical private finance [8].
Private Finance in Healthcare
Health is already dominated by private finance.
Let’s start with the obvious suspects…
- Private frontline healthcare providers exist in every country – low or high income. Some of these may be single doctor-owner medical shops, or partnerships, or large individual hospitals or long-term care homes for vulnerable groups (e.g., elderly, disabled), or large corporations with a range of services for walk-in or residential care.
Financing for these private frontline providers is diverse: from private savings, local bank loan or overdraft up to large commercial loans, private companies offering shares (equity) and debt (bonds and other forms of debt with interest payments).
- Supply chains in healthcare are often constituted by the private sector from small businesses providing niche services (e.g., laundry) that may be financed by business owner savings and local bank lines of credit and loans to a large multinational like Phillips (medical services and equipment). Phillips, for instance, generates income from sales, its numerous patents and copyrights, mergers/demergers., its shareholders (equity) as well as debt (company bonds, fixed rate notes (a debt instrument that pays the same amount on each interest payment date regardless of external factor such as inflation) to name but a few [9].
Then there is…
- Private health insurance. Estimates vary on how much money is involved here (US$1-5 billion) but it is difficult to know since private insurers do not publish details. When you pay your insurance premiums, the insurance company pools these with other policyholder premiums. Some policy holders may never trigger a payout, while some may trigger multiple payouts. When needed (ideally) the insurance company pays the healthcare provider directly. Meanwhile, health insurance companies have large sums of readily available (liquid) money and invest some of this to make more money: for instance, in bonds from governments or large companies or in high interest or fixed-rate-fixed-term savings accounts.
- Public-private-partnerships: NHS England is coming to the end of a long term experiment with private finance through the Private Finance Initiative (PFI). Rather than borrowing to build, the government contracted with the private sector to finance, design, build and maintain public hospitals. These started in 1997 and run for 25–30 years. Massive money is involved, to the detriment of public health services [10].
Let’s remember…
- Financial intermediaries like financial advisers and wealth managers who work with individuals or companies to channel their private savings into shares (equity) or debt for biotech, pharmaceutical, or health equipment manufacturers and are involved in selling, or acquiring private companies working in healthcare through mergers and de-mergers.
- Private equity healthcare funds, in which a financial advisor pools money from different professional and experienced investors and purchase equity in healthcare companies over a longer period. The financial advisory actively takes part in management of these healthcare companies to increase their value before selling investors shareholdings at profit.
These are just a few examples of where private finance dominates in health systems.
Could Private Climate Finance work for Health?
The UNEP defines private climate finance simply as private finance that enables investment in climate change related activities [6]. Imagine that existing private finance flowing through healthcare was channeled towards mitigation, pollution reduction, and biodiversity increase through the diverse range of products and services that private finance has to offer.
This is the clearest way that private finance would support a cleaner, greener, healthcare. Healthcare doesn’t need more loans, or more grants, or more equity, rather to GREEN THE MONEY WE’VE GOT.
When a story of more money at volume through private finance is retold, we are in danger of forgetting some basic moralities at work in healthcare.
Healthcare is a basic social safety net. Frontline staff whether in an ICU ward, community physiotherapy centre, or rape shelter are dealing with highly vulnerable people who may not have the money to pay at point of delivery … nor the health system have deep pockets to constantly pay out to “derisk” private capital.
Let’s pretend for a second that greenwashing doesn’t exist and the stated claims for carbon reduction and biodiversity increase could be true, the basic fact is that private finance is based on RETURN. Return of capital. Return of a revenue stream to the provider of that finance.
Analysis on the NHS England private finance initiative showed that in 99 NHS PFI schemes between 2004 and 2024, almost £2 billion was generated in profit before tax , £1 billion in dividends. At the University College London Hospital PFI, a staggering 50% of turnover was recorded as profit-before-tax and has paid out £200 million in dividends. At the same time, the government has been tied into high-interest inflation-linked loans to PFIs at up to 15% interest rates [10].
The consequences are clear to see – long waiting lists, insufficient staffing, challenges for quality of care, increased government debt, and ultimately a hollowing-out of the public health sector for private gain.
And so…
When the UN family, or large international non-government organisations, or think-tanks argue that it is imperative to attract private finance to pay for adaptation and mitigation… or that the public sector should derisk all of these activities for private capital, it sounds like private finance is money coming out of the ether to magically meet climate goals. But for health, there is MASSIVE volume of private finance in the sector already. In a way, it’s surprising there actually is a public sector.
Private finance is implicated in the way things are now – we didn’t get to here by chance. We don’t need MORE private finance, and we certainly don’t need public sector to take on de-risking role as happened in the NHS PFI. Non-commercial private finance such as frontline charitable or church mission healthcare are more innovative and risk-taking than commercial private finance. And impact investors already accept a smaller return for a verified impact.
We need the finance that is currently swashing around the health system to change into something much more transparent. To directly face-up to the consequences that is enacted in the world because of it. And for private investors to have courage to stand-up and take responsibility for those acts – historical and current.
References
[1] Carbon Brief (2024) Why the $300bn Climate Finance Goal is Even Less Ambitious Than It Seems https://www.carbonbrief.org/analysis-why-the-300bn-climate-finance-goal-is-even-less-ambitious-than-it-seems/
[2] World Wildlife Fund & South Pole (2022) Common Success Factors for Bankable Nature-based Solutions
[3] Climate Policy Initiative Private Finance https://www.climatepolicyinitiative.org/the-topics/private-finance/
[4] Green Climate Fund Private Sector Financing https://www.greenclimate.fund/sectors/private
[5] Financial Times UK (2023) What Does Transition Finance Actually Mean? https://www.ft.com/content/281b2e16-d46d-4997-aa96-521be8ff3599
[6] UNEP (2014) Demystifying Private Finance UNEP Private Finance Initiative
[7] Robbins T (2014) Money Master the Game Simon & Schuster UK
[8] Newell et al (2025). The Contested IPE of Green Finance Competition & Change, 0(0). https://doi.org/10.1177/10245294251318468
[9] Phillips (2023) Annual Report https://www.results.philips.com/downloadcenter#ar23
[10] Rowland et al (2023) P.F.I: Profiting from inflation? Understanding the Impact of Inflation on the Affordability of NHS PFI Contracts Centre for Health & the Public Interest