Working Paper: CEPR ID: DP16061
Authors: Dalya Elmalt; Deniz Igan; Divya Kirti
Abstract: In the absence of sufficient public support for carbon taxes, a more sustainable approach to finance—one that incorporates environmental, social, and governance (ESG) considerations—could be part of the way forward to address climate change. However, our analysis finds no robust link between ESG scores and carbon footprints of major upstream firms—on the supply side of emission-intensive production chains. ESG scores tend to reflect what these firms say they (will) do, not what they actually do, to contain their carbon footprints. Comprehensive disclosure requirements in this important area—and continued efforts to build consensus for effective economy-wide policies targeting carbon emissions—remain crucial.
Keywords: sustainable investing; ESG; major upstream emitters; climate change mitigation
JEL Codes: G30; Q54
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| ESG scores (Q51) | emissions growth (O44) |
| governance scores (H11) | emissions growth (O44) |
| ESG scores (Q51) | emissions performance (Q52) |
| firm fixed effects (C23) | emissions growth (O44) |
| country fixed effects (C23) | emissions growth (O44) |