PDF Summary:Value(s), by Mark Carney

Markets are powerful tools for progress, but without proper management, they can erode the values that make them work. In Value(s), economist Mark Carney examines how modern market structures have shifted from creating value to extracting it, prioritizing individual gain over community well-being and short-term profits over long-term sustainability.

Carney explores how this shift affects everything from climate change to financial stability, arguing that market failures like the depletion of common resources stem from misaligned values and short-term thinking. He offers practical approaches for reconnecting economics with ethics, including impact investing strategies, climate risk management frameworks, and policies that can guide businesses toward creating lasting benefits for all stakeholders. This guide shows how governments, companies, and investors can work together to build an economy that serves both profit and purpose.

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The Historical Roots of Climate Vulnerability

The fact that “the most impoverished countries and communities” are the most vulnerable to climate change is the result of a long historical process. In Loss and Damage from Climate Change, the authors explain that the economies of many low-income countries are heavily dependent on smallholder agriculture and informal labor, which are highly susceptible to climate impacts. This vulnerability is rooted in colonial histories, post-independence economic structures, and limited social protection systems. As a result, most households and businesses in these countries rely on informal risk-sharing and ad hoc disaster relief rather than robust insurance or social safety nets. Climate change exacerbates these pre-existing structural weaknesses, making it harder for these countries to cope with and recover from climate-related disasters. This recognition of structural vulnerability led to the emergence of “loss and damage” as a distinct issue in international climate negotiations. Small island developing states and least developed countries began advocating for loss and damage in the early 1990s, arguing that some climate impacts cannot be avoided through mitigation and adaptation alone. They called for dedicated international support to address these residual impacts, emphasizing principles of equity and historical responsibility.

Reconnecting Worth and Ethics: Policy & Practice

Carney argues that investors should align their ESG strategies with their personal beliefs. Impact investing approaches concentrate on results, emphasizing the advancement of particular impact objectives through a company's products and services. They aim to produce a financial return along with measurable positive effects on society and the environment.

Certain impact approaches significantly depend on impact monetization, a method that translates ESG impacts into money-based figures. This process quantifies a firm's impacts, including both its externalities and its pros and cons. How much these estimates impact investment choices should rely on a comprehensive awareness of their strengths and soundness. These evaluations of impact are determined using a mix of subjective and objective data, with the analysis being largely dependent on the assessors' judgments and values. Investors will evaluate and take action based on their principles.

The Risk of Moral Licensing

Aligning your ESG strategy with your personal beliefs and relying on impact monetization can lead to moral licensing, a psychological phenomenon where doing something good gives you a license to do something bad. For example, you might overestimate the positive impact of your investments and unconsciously compensate by making less ethical choices elsewhere. This effect can be particularly strong when your investments align closely with your personal values, as you may feel you've already "done your part" for a cause you care about. Mazar and Zhong found that people who purchased green products were more likely to cheat and steal than those who purchased conventional products, suggesting that initial virtuous choices can unconsciously permit later unethical behavior.

Carney believes that investing for impact can align profits with societal and ecological goals. It's a form of responsible investing that aims to create measurable benefits for society and the environment while also achieving financial gains. It sets itself apart by rigorously assessing social and environmental results alongside financial ones, and by focusing on additionality—meaning investments that drive social or environmental shifts.

(Shortform note: In Winners Take All, journalist Anand Giridharadas argues that “investing for impact” often preserves elite profits and power instead of genuinely transforming societal and ecological outcomes. He contends that efforts by wealthy elites to solve social problems through market-friendly, “win-win” schemes and philanthropic investment often function less as genuine transformation than as a way to launder their reputations, legitimize their continued dominance, and ensure that no proposed solution ever seriously threatens their wealth, power, or the underlying economic system that produces injustice in the first place.)

Impact investing strategies address dual goals that balance economic gains and social benefits. Certain impact managers trade off some financial profits for more substantial social ones, while others aim to achieve higher financial gains along with social benefits. Impact investing is a highly effective method to generate value and further social objectives, including attaining the United Nations Sustainable Development Goals. The idea is that companies providing value to stakeholders will eventually generate more shareholder value than those that don't. Impact investing explicitly examines how a company's actions affect society and computes the return on social investment. It aims to harmonize monetary and social outcomes that resonate with the principles of their final investors. Some might sacrifice financial profits to boost social gains, while others aim for divine coincidence. In this situation, unlike typical sustainable investments, the precise social benefits being pursued are clearly quantified, monitored, and documented.

The Pitfalls of Impact Investing

Impact investing can be a double-edged sword. While it aims to generate both financial returns and positive social impact, it can also lead to unintended consequences. One major risk is that impact investors may prioritize easily measurable metrics over more meaningful, but harder-to-quantify, outcomes. For example, a fund might focus on the number of jobs created rather than the quality of those jobs or the long-term sustainability of the businesses they support. This can lead to a situation where companies optimize for what can be counted, rather than what truly matters to the communities they aim to serve.

Next, Carney explains how regulatory bodies and financial entities must collaborate to address climate risks. He also discusses how companies with a strong mission and values can create enduring benefits for stakeholders.

Policy & Financial Mechanisms for Value Alignment

Carney believes financial bodies and governing agencies must collaborate to address climate risks. Climate change poses a broad, systemic risk that impacts the entire economy, including financial institutions. Both government and private industry must collaborate to develop essential skills for risk management.

(Shortform note: The authors agree that collaboration between financial bodies and governing agencies is crucial for managing climate-related risks. They argue that climate change poses systemic risks to the financial system, which can lead to widespread economic instability. By working together, these entities can create early-warning systems that combine financial data with climate science, allowing them to identify and address vulnerabilities before they escalate into broader economic problems.)

The UK's main bank, for example, is testing how the country's financial system reacts to various climate scenarios. Financial institutions must find out how their clients are handling both present and anticipated risks and opportunities related to climate. The evaluations will indicate which businesses have plans for moving toward an economy with zero net emissions, which are betting on emerging technologies or lack of government action, and which have yet to consider the potential benefits and challenges. The assessment will assist in the creation and widespread adoption of risk-management methods, enabling the world's financial system to better adapt to climate shifts and government policies on climate.

How to Design a Climate Scenario Test

If you’re a regulator or financial institution, you can design a climate scenario test by mapping your exposures to counterparties and sectors onto transition and physical-risk scenarios. This will help you understand how different climate pathways could affect your capital and solvency over time. To do this, the authors recommend using external scenarios from organizations like the Network for Greening the Financial System or the International Energy Agency. These scenarios provide detailed projections of how different climate policies and physical risks could impact the economy. By applying these scenarios to your own balance sheet, you can identify potential vulnerabilities and develop strategies to manage climate-related risks.

Carney also describes the public policies and credible climate strategies essential for moving to net-zero, plus the steps investors must take to assess and support company transition plans. Finally, Carney outlines how collaboration between nations can help create a values-based economy.

Mechanisms for Value-Aligned Finance & Policy

Carney argues that governmental strategies and credible climate plans are crucial for reaching net-zero emissions. Corporations and financial entities often don’t fully consider the effect their actions have on the climate. Although some companies will predict and adjust to future climate policies, reliable, effective public strategies are needed to spark significant private-sector actions. The shift to net zero is built on public policy. Government initiatives can offer targeted support via financial actions, like imposing pollution costs and backing research and development in certain industries, and regulations like clean fuel requirements and methods for climate efficiency.

(Shortform note: Since the publication of Value(s), there’s been a notable shift in how governments approach climate strategies. The International Energy Agency’s [World Energy Outlook 2022](https://www.oecd.org/en/publications/world-energy-outlook-20223a469970-en.html)_ highlights a move toward green industrial policies, with major economies like the US, EU, and Japan implementing large-scale public investments and tax credits to drive private capital toward low-emissions technologies. This approach contrasts with Carney’s emphasis on imposing pollution costs and methods for climate efficiency, suggesting a broader toolkit for governments to influence private sector behavior.)

When these measures are integrated into a reliable and consistent history of climate policies, they establish a structure that will advance private investment in climate action. A significant carbon price is crucial to an effective policy framework. A clear price for greenhouse gas emissions ensures sustainable businesses aren’t unfairly disadvantaged and motivates high-carbon companies to make changes. Carbon fees should rise slowly and steadily, with an equitable structure that allocates revenue to help low-income families. Public officials must ensure government expenditure aligns with transition needs, such as investing in infrastructure with low carbon output and providing financial assistance for sustainable research and development. Environmental rules aimed at specific targets can spark shifts in sectors with major issues regarding collective action, which might not react as strongly to carbon price signals.

(Shortform note: In This Changes Everything, Naomi Klein argues that carbon pricing can make ongoing greenhouse gas emissions seem normal and legitimate instead of something that must be rapidly phased out. She writes, “Putting a price on pollution has not made us stop polluting; it has turned the right to pollute into a commodity, a new financial product to be bought and sold.” Klein’s concern is that carbon pricing can create a false sense of progress while allowing polluters to continue business as usual. She argues that the focus should be on rapidly phasing out fossil fuels rather than creating complex financial instruments that allow emissions to continue. Klein’s critique suggests that while carbon pricing can be part of the solution, it must be accompanied by strong regulations, public investment in renewable energy, and a clear commitment to leaving fossil fuels in the ground.)

Public climate policies have a bigger effect on private investment when they're more reliable and trustworthy. Climate policy advantages won't be completely apparent until well beyond the next elections, yet immediate costs will be evident. Once they take office, politicians might be inclined to favor superficial rather than substantial environmental initiatives. This can create challenges for businesses trying to foresee the future of climate initiatives, leading to postponed or lessened essential environmental measures. If political leaders eventually take the steps required to prevent a climate disaster, failing to establish credibility in advance will result in a loss of the advantages of committing clearly and early.

(Shortform note: Scholars have linked the issue of policy uncertainty to the concept of “time inconsistency,” which refers to the tendency of governments to change their policies over time, often in response to short-term political pressures or changing economic conditions. This inconsistency can undermine the credibility of long-term policy commitments, making it difficult for businesses to plan and invest with confidence. Kydland and Prescott, who won the Nobel Prize in Economics in 2004, argued that governments often have an incentive to deviate from their announced policies, especially when faced with unexpected events or changing circumstances. This can lead to a lack of trust in government commitments, which in turn can discourage private investment and hinder economic growth.)

When climate policies are clearly defined and robust, the financial system will foresee upcoming regulations and prompt businesses to begin adapting now. Government officials won't have to intervene as much to hit specific environmental goals, and the volume of unproductive assets will notably decrease. If ambitious climate targets are believable, businesses will curb investments in brown technologies, which will shrink the inventory of high-carbon machines that have fully depreciated and can compete against green alternatives in the future. Consequently, to reach a given cut in greenhouse gas emissions, carbon prices can increase less drastically. This may mitigate any side effects of elevated carbon costs, such as the possibility of carbon leakage. Initiating an earlier shift to no emissions can greatly lower the final carbon concentration.

(Shortform note: Carbon leakage occurs when strict climate policies in one region cause greenhouse-gas-intensive activities to move to areas with weaker climate regulations, rather than reducing emissions overall. This can happen when companies relocate production to countries with less stringent environmental rules, or when consumers switch to cheaper, more carbon-intensive imports. The result is that global emissions remain unchanged or even increase, despite local efforts to reduce them. Carbon leakage undermines the effectiveness of climate policies and creates an uneven playing field for businesses. To address this, some experts suggest implementing border carbon adjustments, which would impose tariffs on imported goods based on their carbon content, leveling the playing field and encouraging global emissions reductions.)

When policies are reliable, they lessen the likelihood of companies making incorrect assumptions about upcoming regulations and investing in outdated technology. Politicians may offer policy direction and future plans by laying out precise strategies. This clarity about climate policy assists companies in beginning to adapt to the realities of a future without carbon emissions now, and ensures these adaptations happen smoothly.

(Shortform note: In Why Nations Fail, Daron Acemoglu and James A. Robinson argue that in countries with extractive political and economic institutions, companies often assume that even reliable policies will not be enforced or will be reversed. This leads them to invest in technologies that contradict those policies. For example, in Russia, companies have continued to invest in fossil fuel extraction despite government commitments to reduce carbon emissions.)

Multiple methods exist for creating reliable and foreseeable climate policy. First, politicians of all political views must recognize the goal. Being aware that opposition groups will probably adopt comparable policies provides businesses with the assurance necessary to invest in eco-friendly infrastructure that will be economically viable for decades. As a result, widespread backing from both politicians and the public is necessary for climate policies to be credible. Second, reliable climate policies must immediately reduce emissions to lower eventual carbon concentrations.

(Shortform note: This argument assumes that the political system in question is a multiparty democracy. In a one-party system, the continuity of climate policies may depend more on internal party deliberation and long-term planning than on public support or the endorsement of rival parties. Gilley, for example, argues that in China’s case, climate and environmental policy is shaped by an “authoritarian environmentalism” in which a powerful, insulated party-state uses centralized authority, technocratic expertise, and performance targets within the bureaucracy to design and implement ambitious emissions and energy policies.)

Particular policies ought to connect to anticipated cuts in greenhouse gases. The overall climate approach should be evaluated to determine its alignment with a seamless shift to carbon neutrality. The clearer and more trustworthy reports on net-zero progress are, the more accountable authorities can be held. Third, reliable policy structures should clarify that some actions won't be feasible in a net-zero future, providing compelling reasons to back alternatives.

(Shortform note: To help governments choose the right mix of policies, reporting practices, and policy structures to support a seamless shift to carbon neutrality, Designing Climate Solutions by Hal Harvey, Robbie Orvis, and Jeffrey Rissman offers a “policy sequencing” framework. This approach starts by mapping out the largest sources of greenhouse gas emissions in a given jurisdiction. It then evaluates potential policy instruments—such as performance standards, carbon pricing, or clean procurement—against criteria like marginal abatement impact, administrative feasibility, political durability, distributional effects, and interactions with existing rules. The framework emphasizes quantifying the combined emissions reductions of the chosen policy package and regularly checking progress against a modeled net-zero pathway in the government’s reports on net-zero progress.)

Fourth, a history of climate policy can be established by defining and accomplishing interim objectives that align with longer-term strategies and aims, creating sector-specific policies like emissions targets for steel manufacturing, and pursuing cross-cutting initiatives like pricing carbon.

(Shortform note: Political scientists have found that governments often build a “history of climate policy” through a process called “policy sequencing.” In this process, governments first introduce sector-specific regulations and industrial policies, such as emissions standards for power plants or incentives for renewable energy, which help create new industries and economic beneficiaries.)

In various domains, like fiscal policies, authorities have established trust by assigning distinct, constrained duties to autonomous, expert organizations. Setting climate policy goals, like promising to reach net-zero emissions by 2050, demands total democratic responsibility and can only be done by elected officials. However, governments can hand off parts of the calibration of specific tools required to reach this target to Carbon Councils to enhance how predictable, credible, and effective climate policies are. These delegations could involve: evaluating whether climate policies align with the government's immediate and long-term goals; making comply-or-explain suggestions to the government regarding how these tools are set; or determining how to adjust a select few instruments in a way similar to how monetary authorities adjust policy to reach inflation goals.

The Post-Political Condition

While Carney argues that creating Carbon Councils to calibrate climate policy tools would enhance the predictability, credibility, and effectiveness of climate policies, this approach could have unintended consequences. According to the geographer Erik Swyngedouw, contemporary climate governance exemplifies a ‘post-political’ condition in which conflicts over alternative socio-ecological futures are displaced by a managerial consensus, as expert-driven, technocratic procedures and stakeholder negotiations replace agonistic democratic struggle and thereby neutralise the properly political moment. In this view, delegating the calibration of climate policy tools to autonomous Carbon Councils could further depoliticise major distributive choices about climate action by shifting them from open democratic contestation into insulated expert committees.

Carney also says investors should evaluate and support businesses' plans for transitioning. Transition planning is still in initial stages and varies in quality. Certain companies aim for net zero but have no defined plan to reach it. Other companies have comprehensively integrated their governance, investment, and climate strategies. Investors should evaluate how credible companies' plans are for transitioning. For a transition plan to be effective, it should establish a goal of reaching net zero for emissions in scopes 1, 2, and 3; set distinct short-term goals and criteria for senior leadership to monitor advancement and measure success; include oversight at the board level; and integrate these criteria into the remuneration of executives.

(Shortform note: The Greenhouse Gas Protocol divides emissions into three categories, or “scopes.” Scope 1 covers direct emissions from a company’s owned or controlled sources. Scope 2 includes indirect emissions from the generation of purchased electricity, steam, heating, and cooling consumed by the company. Scope 3 encompasses all other indirect emissions that occur in a company’s value chain, including both upstream and downstream activities. Together, these scopes provide a comprehensive framework for companies to measure and manage their greenhouse gas emissions across their entire operations and supply chains.)

Investors should have the opportunity to vote on how well a company is readying for a shift to net zero. They should also evaluate how well their portfolios align with reaching net-zero emissions and reveal their stance clearly. They can do this by determining the proportion of holdings aiming for net-zero or by estimating how much the investments in a portfolio could contribute to warming.

(Shortform note: Estimating how much the investments in a portfolio could contribute to warming means estimating the portfolio’s share of total cumulative greenhouse-gas emissions. This is possible because, as M. R. Allen et al. explain, there’s a near-linear relationship between cumulative emissions and global temperature. So, if you know your portfolio’s share of cumulative emissions, you can infer the amount of warming it’s responsible for.)

Guiding Principles for a Values-Based Economy

Carney believes cooperative internationalism can help build a values-based economy. This form of multilateralism is centered on results instead of rules, aiming to promote qualities like adaptability, sustainability, and energy. It involves multiple stakeholders, is flexible, and is compatible with various political systems. It’s also inclusive, concentrating on how it affects every citizen's life. Cooperative internationalism emphasizes results, collaborating across borders with a variety of participants, employing less formal methods of partnership that aren't as strict as legal global criteria, and using strategies to align domestic strategies as closely as feasible.

(Shortform note: Some international-relations scholars disagree with Carney’s belief that cooperative internationalism can help build a values-based economy. In The Great Delusion, John J. Mearsheimer argues that the idea of cooperative internationalism is naive and unrealistic. He explains that great powers will always prioritize their own interests over shared economic and moral values. Mearsheimer contends that when economic interests conflict with security concerns, security will always take precedence. He also argues that moral values are often used as a cover for self-interested behavior.)

The finest expression of solidarity through global collaboration is to seek practical solutions to real-world problems. These obstacles involve developing strength, equity, and accountability in finance to enable the international movement of capital, which can then foster job creation, opportunities, and economic expansion. They also include creating dynamism by promoting free commerce for small companies to foster inclusive growth, as well as promoting sustainability through shared methods of making sustainable finance mainstream and similar nationwide actions to fight climate change.

Data Governance as a New Development Policy Issue

Another obstacle to global collaboration is the need to establish fair and interoperable rules for cross-border data flows and the power of global digital platforms. The United Nations Conference on Trade and Development (UNCTAD) argues that the governance of data and digital platforms has become a core development policy issue, because a small number of global digital platforms increasingly act as gatekeepers to the digital economy by controlling key data, infrastructure and markets, and without effective international cooperation on data governance and competition policy many countries risk remaining on the periphery of the digital economy, with limited capacity to capture value from their data and digital innovations.

Operationalizing Values in Business & Society

Carney argues that companies with a clear mission and values can create lasting benefits for every stakeholder. A company should aim to offer solutions that are profitable and socially beneficial. To do this, it must reconcile the differing priorities of every stakeholder. A company's success relies on unique capabilities that give it a competitive advantage. These advantages rely on the company’s stakeholders, which can be bolstered by a common mission and building social value. Purpose operates on several levels.

(Shortform note: In Woke, Inc., Vivek Ramaswamy argues that many of the world’s biggest companies loudly advertise their social values and moral commitments while quietly relying on exploitative, insecure labor and opaque global supply chains. In these cases, the language of stakeholder capitalism and “wokeness” becomes a useful smokescreen that protects their brand and profits even as the most vulnerable workers in the chain receive none of the promised benefits and often bear additional risks and harms.)

Internally, it builds the social resources required to create value, such as robust employee engagement and tightly functioning teams. Externally, it centers attention on service to customers and on coordination. This creates loyalty among customers, and over time, they become stakeholders, enhancing trust and fair conduct. Purpose also acts as a societal story, assisting in developing and preserving the company's approval to operate within society. Ultimately, purpose reflects how companies ethically contribute to improving the world.

(Shortform note: To apply this idea in your daily work, take one minute before starting a task or meeting to write down or say aloud how your work will help a specific customer or community. This will help you frame your actions as contributions to your company’s purpose. If you’re a manager, you can do this with your team. This will help you stay focused on the bigger picture and remind you of the impact your work has on others.)

It's evident that possessing a purpose and adhering to values help a company’s bottom line. Organizations with employees who say that their leaders' actions align with their statements and that their business methods are moral and trustworthy see higher profits. Organizations with employees who clearly understand the company’s purpose tend to perform better financially. Purposeful companies create value by engaging with stakeholders, including staff, vendors, clients, and society. The purpose of a corporation instills unity at regional, country-wide, and international levels and acknowledges the importance of sustainability for future generations. By aligning diverse interests with a common goal, organizations driven by purpose can achieve greater impact, vibrancy, and profitability.

Purpose and Profitability

Claudine Gartenberg, Andrea Prat, and George Serafeim found that companies with a clearly understood purpose deliver better financial results. They analyzed data from over 450,000 employees across 429 companies and found that when middle managers and frontline employees (but not just senior executives) reported a strong sense of purpose, those companies had higher stock returns and better financial performance. The authors suggest that when employees at all levels understand and believe in the company's purpose, it leads to better performance. This research supports Carney's argument that purpose-driven companies can achieve greater impact and profitability.