Climate Change
Climate change is forcing a dramatic transition toward a low-carbon economy, and business faces considerable challenges in developing viable response strategies. Considerable uncertainties exist concerning the extent and pace of climate change, the regulatory response, and the potential impact on markets and technologies. Different countries are adopting diverse approaches to addressing climate change that have significant business implications. The center collaborates with overseas universities in order to undertake wider international and comparative research on these topics.
Current Research Collaborations
Financialized Climate Governance:
Evaluating the role of institutional investors in addressing the climate crisis.
David L. Levy
University of Massachusetts, Boston
Rami Kaplan
Tel Aviv University
Large institutional investors are expressing growing concern that the value of assets, portfolios and even national economies are increasingly subject to climate risks, and so they are pressuring companies to disclose and address these risks. This phenomenon, which we term “financialized climate governance” (FCG), could potentially constitute a powerful change agent, given the primary role of capital markets in corporate governance. FCG also faces several challenges, however. The first is that many companies, especially in carbon-intense sectors, still benefit from massive externalities and will struggle to find profitable strategies for rapid transition. A second challenge is that asset managers still seek maximum returns in the short term to satisfy investors, meet their own performance targets, and pay pensions. Moreover, investors are generally unwilling to intervene in corporate operations and strategy. Third, FCG represents the privatization of governance and shifts power toward business and investors and away from environmental NGOs and governments. Government regulation and investment will be needed, however, to create the economic context for profitable low-carbon strategies.
This project is being conducted in conjunction with my co-PI Dr. Rami Kaplan at Tel Aviv University and funded by two grants, US-Israel Binational Science Foundation, $202,500 over three years; and the Brown University Climate Social Science Network, $53,500 over 2 years.
The project seeks to examine four questions: (1) the factors driving the rise of FCG, the actors and networks involved, and how it is different from other forms of climate activism and corporate social responsibility; (2) the role of ESG data and other metrics that intermediate between corporate climate practices and financial measures of value and risk; (3) how FCG is shifting the organizational landscape of climate action between business, finance, governments and non-governmental organizations; and (4), the effectiveness and limitations of FCG in driving real change.