How Can We Promote Impact/ESG Investing? - Clarifying the Skeptical Reasons and Benefits of Addressing Impact & ESG Investing in the Age of Artificial Intelligence

Abstract

Drawing upon professional experiences in Impact/ESG consulting and investment, this thesis explores the efficacy of Impact and ESG investments in enhancing corporate value. Chapter 1 introduces the complex landscape of these investments, outlining common misconceptions and the diverse definitions that prevail across different stakeholders. Chapter 2 delves into the metrics and standards used to assess these investments, highlighting the confusion caused by multiple rating systems and the impact on stakeholder decisions. Chapter 3 presents an event study focusing on the stock market reactions to ESG ratings changes, revealing that while negative ratings significantly influence market behavior, positive changes do not. This suggests that investors primarily use ESG ratings for negative screening. Chapter 4 extends the discussion to the role of artificial intelligence (AI) in impact investment, assessing both its potential and risks within the context of future societal impacts. Chapter 5 explores the practical applications of impact investments, particularly how they can address global health challenges through initiatives like the Triple I. The conclusion synthesizes these insights, arguing for a redefinition of ESG and impact investment frameworks that align with corporate strategies. It proposes that blending these investments with robust business models and transparent metrics can lead to sustainable corporate growth and greater stakeholder satisfaction. This thesis provides a roadmap for companies and investors aiming to genuinely enhance corporate value and societal welfare through impact and ESG investment practices.