Sustainable Investing in Theory and Practice: The Ultimate Solution

Abstract

When investors prioritize climate change as the paramount factor in sustainability, they tend to focus primarily on the environmental aspects of companies. This may lead them to view the other elements of ESG as secondary or even irrelevant to their investment criteria. Consequently, the current form of ESG ratings may no longer provide useful guidance. 

The key solution for investors in fighting climate change is to invest in companies with significant environmental impact and leverage their shareholder rights to support initiatives aimed at emission reduction. This represents a departure from the prevailing mainstream approach to sustainable investing and presents a significant challenge, but it is imperative as humanity confronts an existential threat due to the escalating effects of climate change.

JEL Classification: G11, G32, Q56