The rise of investor-driven climate governance: From myth to institution?

Investor-driven climate governance (ICG) is a global field of organizations and activities that has formed around the notion that, by using climate risk (AKA “ESG”) metrics in financial decisions, institutional investors and banks will promote a twofold effect: securing their financial returns and exerting pressure on polluting companies to reduce emissions. While the premise that climate risk creates financial risk is largely mythical—resting on faulty economic logic— Kaplan explores the forces that drive the widespread embrace of ICG by major financial institutions, regulators, and standard-setters around the world, and moreover, the potential of institutionalization to create positive climate governance effects.

He argues that ICG has expanded because the economic and political interests of many actors converge around this mode of governance. At the same time, the inefficacy of ICG as investment logic breeds disjunctures in the field, widespread decoupling of rhetoric from practice, and “greenwashing.” Nonetheless, he illuminates the institutional pressures that have successfully disseminated and legitimized ICG, and the dynamic feedback mechanisms that support its momentum, potentially rendering the myth self-fulfilling, despite its flaws.

Programme