Is sustainable investing an important tool in supporting a more sustainable future or a distraction from more important priorities?
Extensive research on sustainable investing has shown that investor sustainability preferences can affect cost of capital and that investor engagement, particularly collective engagement, can change corporate behaviour on sustainability.
On the other hand, this same research suggests that the scale of impact of sustainable investing falls short of what is required to address climate and biodiversity externalities. This is leading some academics and market participants to suggest that investors should move away from trying to have direct impact on, for example, climate outcomes but instead direct efforts to influencing the system so that better outcomes can occur.
The aim of this project is to facilitate ongoing engagement between academics and practitioners to develop a shared understanding of the opportunities and limits of sustainable investing.
This project is closely related to the highly topical question of how investors should think about setting climate targets. Political attacks in the US have led to large-scale withdrawal from climate coalitions such as Climate Action 100+, Net Zero Banking Alliance, and Net Zero Asset Manager initiative. While US politics has provided the catalyst, concerns were already growing within the alliances about how 1.5C commitments could be reconciled with fiduciary duty in a world where investor influence is limited and government policy is increasingly misaligned with a 1.5C pathway. Nonetheless there is appetite amongst investors to undertake meaningful climate action. This project will help to frame how investors can be most effective in a robust and enduring way.
This project is funded by the Global School of Sustainability.
For more information contact Tom Gosling t.gosling1@lse.ac.uk
