Global Investor Group 22/11/2021
"(...) When asset managers are criticized for the vast greenwashing happening in financial markets (EDHEC, 2021), the answer is often that greenwashing is only an issue for passive investments, while active strategies – particularly active ownership – can fix all these problems. Investors preoccupied with climate change can be “active owners” and influence the carbon footprint of investee companies by voting at shareholder meetings on climate-related issues and by actively engaging with executives and board members. We study to what extent institutional investors’ ownership affected corporate carbon emissions in 68 countries for the period from 2007 to 2018 and find that institutional investment on average does not appear to lead to any tangible carbon footprint reduction.
Although national governments have pledged to reduce their greenhouse gas emissions, delivering on their promises will require significant changes in the production and consumption of energy by the sources of these emissions, primarily companies. The financial system is increasingly aware of the risks posed by climate change (Krueger et al., 2020; Bolton and Kacperczyk, 2021) and, accordingly, many financial actors are making investment decisions to reduce their exposure to assets – primarily securities issued by companies – particularly sensitive to climate risks. Because public and private pension schemes, insurance companies, sovereign wealth funds, mutual funds and other institutional asset managers have a long-term investment horizon, the reduction of medium to long-term risks such as climate change is for them of paramount concern (Gibson et al., 2021; Krueger et al., 2020). Moreover, many of those institutional investors also have substantial direct and indirect exposure to sectors that are particularly exposed to climate risks, such as infrastructure and energy. (...)"
Copyright Global Investor Group