Limits to Private Climate Change Mitigation

IMF Working Papers, April 29, 2021

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The paper examines the link between emissions growth and ESG scores using firm-level data for the largest emitters worldwide.
Main empirical result: at best a weak relationship between ESG scores and emissions growth.
Firms with better ESG scores display somewhat slower emissions growth, but:
- The relationship is substantially attenuated and no longer statistically significant when analyses are limited to within-country variation.
- The relationship is substantially attenuated and no longer statistically significant when analyses are limited to within-firm variation.
Conclusion: limited scope for sustainable investing strategies conditioned solely on ESG indicators to meaningfully help mitigate climate change.

Sustainable investing based only on ESG indicators is unlikely to achieve climate change goals on its own.
The findings underscore the need to continue building consensus toward effective economy-wide policies to address climate change.

Subject: Climate change, Climate finance, Corporate social responsibility, Economic sectors, Environment, Greenhouse gas emissions
Keywords: Climate change, climate change goal, climate change mitigation, Climate finance, Corporate social responsibility, emissions growth, ESG indicator, ESG score, Global, Greenhouse gas emissions

IMF Working Paper: "Limits to Private Climate Change Mitigation" (Working Paper No. 2021/112).