Limits to Private Climate Change Mitigation” is an interesting working paper by the IMF on the link between ESG scores and carbon footprint.

In principle, greater attention from climate-conscious investors, shareholders, regulators and the general public on ESG considerations should normally encourage firms to improve their ESG scores and, in the process, bring down emissions.

Discouragingly, results from this paper suggest that high ESG scores are not necessarily correlated with companies’ actual carbon footprints.

Therefore, from a climate change policy making standpoint, managing GHG’s footprint cannot be achieved solely by over-relying on ESG indicators.

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