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Limits to Private Climate Change Mitigation

Author

Listed:
  • Dalya Elmalt
  • Mr. Divya Kirti
  • Ms. Deniz O Igan

Abstract

As climate change looms larger, many look to sustainable investing that incorporates environmental, social, and governance (ESG) concerns as part of the way forward. To assess scope for ESG-conscious investing to achieve climate change goals, we explore the link between emissions growth and ESG scores using firm-level data for the largest emitters around the world. Discouragingly, our analysis uncovers at best a weak relationship: firms with better ESG scores do display somewhat slower emissions growth but this link is substantially attenuated and no longer statistically significant if we limit attention to within-country or within-firm variation. Our findings suggest limited scope for sustainable investing strategies conditioned solely on ESG indicators to meaningfully help mitigate climate change and, more broadly, underscore the need to continue to build consensus towards effective economy-wide policies to address climate change.

Suggested Citation

  • Dalya Elmalt & Mr. Divya Kirti & Ms. Deniz O Igan, 2021. "Limits to Private Climate Change Mitigation," IMF Working Papers 2021/112, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2021/112
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    Cited by:

    1. Hansen, Lars Peter, 2022. "Central banking challenges posed by uncertain climate change and natural disasters," Journal of Monetary Economics, Elsevier, vol. 125(C), pages 1-15.
    2. Torsten Ehlers & Ulrike Elsenhuber & Anandakumar Jegarasasingam & Eric Jondeau, 2024. "Deconstructing ESG scores: investing at the category score level," Journal of Asset Management, Palgrave Macmillan, vol. 25(3), pages 222-244, May.
    3. Alberto Barroso Del Toro & Laura Vivas Crisol & Xavier Tort-Martorell, 2022. "The Sustainability Narrative: A Multi Study Using Event Studies to Analyse the American Energy Companies Shareholder’s Reaction to Sustainability News," IJERPH, MDPI, vol. 19(23), pages 1-17, November.

    More about this item

    Keywords

    climate change goal; ESG score; emissions growth; ESG indicator; climate change mitigation; Corporate social responsibility; Climate change; Greenhouse gas emissions; Climate finance; Global;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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