The effectiveness of sustainable investing has been challenged, with critics like Tariq Fancy describing it as a mere placebo. Amidst rising skepticism and stricter disclosure requirements, a deeper dive reveals that traditional methods of influencing companies.

Whether sustainable investors can have a positive impact on business and society has been the center of debate in recent years. One major obstacle holding sustainable investing back from maximizing its impact is that most investors operate with too narrow of an understanding of how impact can come about. Most investors believe they have two primary ways to influence companies. First, there’s portfolio screening, often termed “exit.” In this approach, investors shift capital from non-sustainable to sustainable companies. The second strategy is shareholder engagement, frequently called “voice.” Here, investors directly urge companies to adopt more sustainable practices through means like meetings, shareholder proposals, or voting.

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