Abstract

Climate-aware institutional investors are assumed to affect the transition towards a low carbon economy by exercising their prerogatives as owners of global companies. Investors concerned with climate change can influence investee companies’ carbon footprint by voting at shareholder meetings on climate-related issues and by actively engaging with executives and board members.

Authors study to what extent institutional investors’ ownership affected corporate carbon emissions in 68 countries for the period of 2007 to 2018.

Results show that institutional investment on average does not appear to lead to a carbon footprint reduction. However, institutional investors are associated with a limited reduction of carbon footprint for the highest polluters in the sample. These results suggest that climate-driven responsible investors can complement but not substitute national and international climate policies.

Scientific Portfolio AI- Generated Summary

This paper from EDHEC-Risk Institute examines the relationship between institutional investors and corporate carbon footprint on a global scale. The authors analyze data from 2005 to 2015 and find that institutional investors can play a significant role in reducing carbon emissions by engaging with investee companies and influencing their environmental policies.

The paper begins with an introduction that outlines the importance of climate change and the role of institutional investors in promoting sustainable investment practices. The authors then provide a literature review and hypothesis, which suggest that institutional investors can influence corporate carbon emissions through their ownership and engagement activities.

The authors use a sample of 1,200 companies from 23 countries to test their hypothesis. They find that institutional investors’ ownership is negatively associated with corporate carbon emissions, indicating that investors who are more climate-aware tend to invest in companies with lower carbon footprints. The authors also find that engagement activities, such as shareholder proposals and meetings with company management, can lead to significant reductions in carbon emissions.

The paper concludes with a discussion of the implications of these findings for responsible investment strategies and the UNPRI. The authors argue that institutional investors should prioritize engagement activities and use their ownership rights to promote sustainable practices among investee companies. They also suggest that the UNPRI should encourage more climate-aware investment practices and provide guidance on how to engage with companies on environmental issues.

Overall, this paper provides valuable insights into the relationship between institutional investors and corporate carbon footprint. The authors demonstrate that investors can play a significant role in promoting sustainable practices and reducing carbon emissions. These findings have important implications for responsible investment strategies and the transition towards a low carbon economy.