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COP28 targets for mobilizing private investment in fossil fuels extraction industry to cope with the climate change

Author

Listed:
  • Zhou, Gang
  • Bahn, Gwonsoo
  • Lao, Jian
  • Zhang, Yuan

Abstract

This study analyzes data from the Sovereign ESG Data Portal to assess how macroeconomic factors influence ESG (Environmental, Social, and Governance) investments in the fossil fuels extraction sector across G7 countries from 2005 to 2022. Using the PMG-ARDL technique, findings reveal that a 1% rise in income inequality leads to a 0.14% decrease in ESG investment in the short term and 0.43% in the long term. Conversely, a 1% increase in household spending on education results in a 0.12% short-term and 0.16% long-term boost in ESG investment. Economic growth does not significantly affect ESG investment, likely due to the sector's profit-driven nature. Additionally, a 1% increase in industry value decreases ESG investment, while better governance practices enhance it. The study suggests that policies focusing on improving governance, reducing inequality, and increasing education spending are crucial for promoting sustainable investments.

Suggested Citation

  • Zhou, Gang & Bahn, Gwonsoo & Lao, Jian & Zhang, Yuan, 2024. "COP28 targets for mobilizing private investment in fossil fuels extraction industry to cope with the climate change," Resources Policy, Elsevier, vol. 97(C).
    • Handle: RePEc:eee:jrpoli:v:97:y:2024:i:c:s0301420724006524
    DOI: 10.1016/j.resourpol.2024.105285
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    Keywords

    Private investment in sustainable projects; Sustainability of fossil fuels extraction industry; ESG investment; G7; PMG-ARDL;
    All these keywords.

    JEL classification:

    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • Q35 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Hydrocarbon Resources
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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