When BlackRock, the world’s largest money manager, announced in January that climate risks would become central to its investment strategy, it was a sign of the times.

Multiple events in the past few months indicate that we’re in a new phase in the global effort to address climate change. The action is happening largely outside the United Nations’ negotiations. What changed, and what are the consequences?

In the 1990s, national governments led the charge, trying to stop climate change by building formal treaties with legally binding targets to greenhouse gas emissions. That first phase ended with the slow failure of the Kyoto Protocol.

In the second phase, cities, businesses and other organizations tried to fill the void, working to restrict emissions through loose networks and voluntary agreements. The 2015 Paris agreement was an effort to make progress in the absence of binding national targets.

But we’re now entering a third — and very different — phase. This time, an informal coalition of technocrats and business elites is taking the lead. The tools are also different. Rather than working through formal treaties or informal networks, they are using high finance and international trade to achieve their aims, putting central banks, border taxes and financial arrangements to work.

Previous approaches have not cut emissions

Stopping climate change requires international cooperation, as no country can cut enough emissions on its own to solve this global problem. Unilateral cuts have few benefits and many costs.

That’s why national governments signed the U.N. Framework Convention on Climate Change in 1992 and the Kyoto Protocol in 1997. The U.N.’s intergovernmental process will continue with COP26 in Glasgow in November 2020. But countries either refuse to accept meaningful commitments or break their promises.

The second phase of climate efforts tried to make a virtue out of necessity. There was no world government to enforce climate rules, so other groups took voluntary actions.

This approach yielded some results. People experimented with carbon markets. A network of cities promoted sustainable development. As political scientists showed, companies, nongovernmental organizations and private organizations used “entrepreneurial authority” to set standards, coordinate actions and develop norms.

But this approach had clear limits. Markets do a better job at addressing private interests than supplying public goods (such as a stable atmosphere). Cities compete against one another, so they can’t demand too much greenness on their own. Divestment campaigns and fossil fuel subsidy reforms have a patchy record, as my research with Thijs van de Graaf and Mathieu Blondeel shows.

Investors are increasingly worried about global climate change

Global finance is the driving force behind the new, third phase of climate efforts, because investors are waking up to the reality of climate risk. Hedge fund director Christopher Hohn announced in December that he would punish directors of companies that fail to disclose their emissions. BlackRock’s announcement similarly highlighted climate worries.

Fossil fuel owners are feeling the consequences. When Saudi Aramco, the national oil firm, launched the world’s largest IPO in late 2019, most international investors stayed away. A few weeks later, Brazil tried to auction off rights to oil fields, but again, international players did not bid.

Climate change wasn’t the only risk in each case. Still, investors worry increasingly about “stranded assets” — economic investments that are suddenly no longer valuable — in an unknown climate future.

Financial regulators are getting involved

Public servants, like outgoing Bank of England head Mark Carney, and incoming European Union technocrats Ursula van der Leyen and Christine Lagarde, are well aware of investors’ concerns. These technocrats are often semi-independent from elected politicians, allowing them to push to change national policies without necessarily having to get new laws passed.

Lagarde wants climate change to be a central part of the European Central Bank’s mission. Van der Leyen has outlined an ambitious new plan for a European carbon border tax.

The European Investment Bank is setting new standards for what counts as a “green bond.” This patchwork of border taxes and new finance pulls actors outside the U.N. process — such as the World Trade Organization and the Bank of International Settlements — into climate change debates.

Europe is leading the charge on these issues, but other countries are stepping up, too. Globally, 46 countries have implemented or scheduled carbon-pricing programs, which might be essential for non-European countries that wish to avoid being targeted by the proposed European carbon border tax.

What comes next in Trump’s fight with California about auto emissions standards?

The United States could choose to be more involved. Some scholars have suggested using U.S. regulations to make global commerce greener. California’s efforts to step up fuel efficiency standards are an example, but the Trump administration is fighting it.

The third phase of climate efforts may or may not work

Investor concern and action by regulators seem to be driving the third phase of climate policy. But this approach faces several challenges, including a deepening transatlantic divide. The Trump administration is already threatening to fight the proposed European carbon border tax. And while the U.S. Federal Reserve is aware of climate risks, it judges them differently than the European Central Bank or the Bank of England.

Perhaps the key divide, though, is between the technocrat-business coalition and elected politicians. Politicians are often reluctant to enact pro-climate measures, especially when they count on support from fossil fuel businesses (e.g., coal in Australia, oil and gas in the United States) or regions (e.g., Canada’s oil-rich province of Alberta).

But research shows that politicians and their staffers often underestimate their own constituents’ demand for pro-climate policies. That’s one reason pro-climate policies often thrive when technocrats are shielded from direct democratic pressures.

Such measures could help put global emissions on a reliably downward trajectory, at long last. Jessica Green, Thomas Hale and I have argued that climate change is leading to existential politics, where different coalitions fight over whether their way of life can survive. While big businesses linked to fossil fuels have been leading one side of that fight for decades, a growing coalition of other business interests and technocrats is mobilizing on the other.

Jeff Colgan is the Richard Holbrooke associate professor at Brown University. He tweets at @JeffDColgan.