ESG Funds and the Question of Sustainability Impact

Climate change is perhaps the most crucial contemporary challenge for societies and businesses worldwide. Tackling it requires vast financial resources. Reflecting this issue, the 2015 Paris Agreement states that mitigating climate change requires ‘making finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development.’ In a recently published article, we investigate ESG funds—the most prominent financial instrument of sustainable finance—and unpack their sustainability impact, that is, whether and how they actually contribute towards a green transition.

ESG stands for integrating environmental, social and governance aspects in the capital allocation strategy of investment funds. In essence, most ESG funds take conventional mutual funds as their baseline and then alter the capital allocation according to environmental, social and governance factors.  Read More 

Jan Fichtner is a Senior Researcher at the SuFi Project at the University of Witten/Herdecke, Germany. Robin Jaspert is a PhD student at the Graduate College ‘Standards of Governance’ at Goethe University Frankfurt. Johannes Petry is the principal investigator of the StateCapFinance project at Goethe University Frankfurt, and a CSGR research fellow at the University of Warwick.