Responsibility of the private sector to fossil fuels transition through ESG awareness

Abstract

Sustainable energy infrastructure is vital for addressing global climate challenges, and ESG investing has emerged as a key driver in greening private enterprises. This study examines the impact of ESG investing on private sector energy infrastructure investment in 20 OECD countries from 2010 to 2021 using an Autoregressive Distributed Lag (ARDL) model. Findings reveal that a 1% increase in ESG investment boosts short-term private investment by 0.15% and long-term investment by 0.26%. Conversely, economic risk and consumer price index reduce short-term investment by 0.43% and 0.27%, respectively, with similar long-term effects. Economic growth, human capital, and internet access enhance short-term investment by 0.31%, 0.29% and 0.54%. Long-term analysis shows a 1% increase in past investments leads to a 0.49% rise in future investments. To foster sustainable investment, OECD nations should enhance ESG regulations, standardize reporting, improve human resource management, promote green technology R&D, and raise awareness.