Responsible Investing and Environmental Economics

Green Finance and the Transition to a Green Economy
Living reference work entry


This chapter aims at discussing responsible investing and environmental economics within the context of climate change. It was observed that publicly traded firms are applying sustainability strategies in their operations and capital spending, because investors are increasingly interested in responsible investing. For publicly traded firms and responsible investors, such changes towards more sustainability mitigate the risk for future unburnable carbon and/or bursting of the carbon bubble on capital markets because of climate change-related regulations. However, because of greenwashing, some concerns arise that material amounts of publicly traded firms’ unsustainable performances may be hidden from financial statements and annual reports. As a consequence, the challenge for responsible investors is not only to: (i) evaluate the scale of environmental operational and capital investments (e.g., attempts to decrease toxic emissions) but also to (ii) evaluate publicly traded firms’ environmental performance associated with the assets locked into their reserves (e.g., oil reserves for oil publicly traded firms). This chapter follows a specific structure to explore the challenge for responsible investors. Section “Introduction and Literature Review” is focused on an introduction and literature review. Section “Featured Case in Point” is focused on a featured case related to responsible investing and environmental economics. Section “Reflection Questions” refers to reflection questions with theoretical developments on: (i) investing and economics, (ii) responsible investing and environmental economics, and (iii) responsible investing with passive versus active investing strategies. Section “Exercises in Practice” presents applied exercises to be used in class. Section “Engaged Sustainability Lessons” summarizes engaged sustainability lessons. Section “Chapter-End Reflection Questions” expands on the chapter with reflection questions. The discussion in terms of the impact of responsible investing on environmental economics is of interest, since it is believed that substantial adjustments of regulating practices are required for publicly traded firms to realistically alter their financial statements and annual reports, for responsible investors to be fully informed, and for engaged sustainability to thrive.


Socially Responsible Investing (SRI) Divestment Green finance Environmental economics Green house gas emissions Stranded assets Carbon bubble Capital markets Efficient market hypothesis 


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Copyright information

© Springer International Publishing AG 2018

Authors and Affiliations

  1. 1.Ron Joyce Center for Business StudiesMount Allison UniversitySackvilleCanada

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