| Active managers are often seen as being concerned about climate change and the behaviour and practice of investee companies.
It is widely believed that their active votes at shareholder meetings on climate-related issues can influence the carbon footprint of investee companies.
A study conducted by Gianfranco Gianfrate, Professor of Finance, EDHEC Business School, Sustainable Finance Lead Expert, EDHEC Risk institute, and this team shows the extent institutional investors’ ownership affected corporate carbon emissions in 68 countries for the period 2007 to 2018 and they find that institutional investment on average does not appear to lead to any tangible carbon footprint reduction (measured by CO2 emissions and carbon intensity).
However, institutional investors are associated with a limited carbon footprint reduction for the highest polluters in the sample. Thus, responsible investors can help the decarbonisaion of investees but are unlikely to play a major role in the low-carbon transition unless their active ownership becomes more effective.
“Our analysis shows that institutional shareholders do not reduce their investees’ carbon footprint in any meaningful way but they do contribute to carbon emission reductions in the most polluting companies. However, even for the highest emiiting companies in our sample, the carbon footprint reduction is of a limited magnitude. Therefore, active ownership – as it has been carried out so far – is not a solution in the fight for climate change but, at best, a tool of greenwashing”, as summarized by Prof. Gianfranco Gianfrate.
The study lists a number of activities and tools used by institutional investors reporting to UNPRI.
| All opinions expressed are those of the author. investESG.eu is an independent and neutral platform dedicated to generating debate around ESG investing topics.
