Investing for climate action: The role of capital markets in enabling a low-carbon transition

Abstract

Economies around the world face a stark choice – to bolster fossil fuel production and face climate catastrophe or to keep fossil fuels in the ground and face trillions in potential asset stranding. Capital markets, as influential stakeholders, have a central role to play in sustainability transitions due to their inordinate influence on the governance of the fossil fuel extraction industry. Using network analysis, this dissertation links fossil fuel firms to equity owners by distinguishing ownership characteristics of top shareholders and establishing a ranked list of the most prevalent shareholders based on emissions potential and network centrality. The results not only assert that financial markets can influence the trajectory of sustainability transitions as enablers for socio-technical transitions but also exemplify that power is concentrated among just a handful of powerful and path-dependent financiers. The dissertation concludes that a concentrated number of investors have the potential to influence the strategic direction and governance of these firms and should consequently be held accountable for financing the economic activities that contribute to climate instability. It directly contributes to the fragmented body of academic research on climate finance, energy policy, and sustainability transitions.