Can Sustainable Investing Save the World? Reviewing the Mechanisms of Investor Impact

Julian F Kölbel, Florian Heeb, Falko Paetzold, Timo Busch

2023 | Academic | Impact Investing, Sustainable Investing

Our results suggest that investors who seek impact should pursue shareholder engagement throughout their portfolio, allocate capital to sustainable companies whose growth is limited by external financing conditions, and screen out companies based on the absence of specific ESG practices that can be adopted at reasonable costs. For rating agencies, we outline steps to develop investor impact metrics. For policymakers, we highlight that SI helps to diffuse good business practices, but is unlikely to drive a deeper transformation without additional policy measures.