2011/04/13 by Adam Harmes · 1 citation
Business, Management and Accounting · Economics, Econometrics and Finance · #Corporate Social Responsibility Reporting #Sustainable Finance and Green Bonds #Environmental Sustainability in Business #Incentive #Environmentalism #Work (physics) #Climate change #Institutional investor #Investment (military) #Business #Climate change mitigation #Carbon market #Economics #Accounting #Finance #Market economy #Corporate governance #Political science #Law
paper · pdf · doi:10.1162/glep_a_00057
openalex publication_date 2011/04/13 · openalex created_date 2025/10/10 · openalex updated_date 2026/05/21
This article examines the potential effectiveness of socially responsible investment (SRI) and investor environmentalism through carbon disclosure in terms of their key goal of creating real financial incentives, through share price performance, for firms to pursue climate change mitigation. It does so by theoretically assessing the two main assumptions which underpin investor environmentalism as promoted by SRI funds and NGOs such as the Carbon Disclosure Project: those concerning the power of institutional investors, and the “business case” for climate change mitigation. In doing so, it argues that the potential of using institutional investors to create real financial incentives for climate change mitigation, in the form of share price performance, has been considerably overestimated and that there is not even a strong theoretical case for why carbon disclosure should work in this regard. This is argued based on the structural constraints faced by most institutional investors, as well as the fundamentally incorrect assumption about climate change, that it is a form of market failure, which theoretically underpins these initiatives.