A critical review of Environmental, Social and Governance (ESG) investing.
Authors: Franco Becchis, Fondazione per l’Ambiente & Turin School of Local Regulation
In recent years, increasing attention has been paid to the concept of ESG investing in the realm of financial markets. ESG has often been presented as a promising tool for fostering the transition to a socially equitable and decarbonized economy. However, there are also increasing concerns over its actual ability to face the challenge of climate change and promote a real shift from fossil fuels to clean energy technologies and other socially sustainable practices.
Drawing on recent advancements in the literature, this paper analyses the major shortcomings of ESG investing, examines the latest EU regulatory efforts in the ESG field, and discusses policy options to restore the credibility of ESG ratings and reconcile the goals of profit maximization and environmental protection.