Where investors have a sufficient commercial incentive to improve environmental performance as part of their investments they will do so. Since different types of investments have different decision-making processes and links to the environment, different leverage points exist for increasing those incentives. Governments play central roles in setting the frameworks under which private investment occurs. They also are best positioned to address market failures, including externalized environmental costs. How they do so can have major impacts on both the levels of private investment and its environmental content.
The environmental policy implications of both of these topics -- investor decision-making and government roles -- are considered in this chapter. The opportunities they create for increasing the environmental improvements accompanying private capital flows are described in Chapter 10.
The critical first step in channeling more private investment to the goal of sustainable development is to understand how the commercial interests of individual, private investors relate to environmental issues. The reasons for improved environmental performance and the changed roles of the different parties described in Chapter 8 provide a strong base for such an understanding.
The process starts with a hard reality, however: the vast majority of private investors do not and will never care about the environment for its own sake. Their focus is and will remain on minimizing risk and