Systematic Avenues to Sustainable Investing

Climate change is among the most prevalent environmental challenges of our times. It is widely
accepted that global warming is to be limited by 2 C, preferably 1.5 C, compared to pre-industrial
levels to avoid tipping points and cascade effects that could lead to an irreversible release of
currently stored greenhouse gases. Considering these challenges, the Paris Agreement is an
important step forward, requiring signatories to commit to reducing their greenhouse gas
emissions. Investors will play a crucial role in thus mitigating climate change; indeed, different
financial regulations require investors to manage climate risks and to increase transparency on the
climate effects of their investments. The purpose of our proposed research project is to advance a
systematic framework to sustainable investing that ultimately enables investors to accelerate
temperature alignment and other non-financial sustainability considerations. As such we will
further the academic profession's understanding of the underlying economic mechanism and provide guidance to the investment management industry for efficiently navigating sustainable investment processes.