Relationship between CO2 Emissions, Environmental Rating and ESG Integrated Ratings

The purpose of this academic paper was to investigate the degree to which ESG investors are susceptible to green washing, including carbon washing when making financial decisions.Economic development is exacerbating many interconnected environmental problems, including soil and water pollution, air pollution, climate change, and the depletion of natural resources.Global warming is one of the biggest problems and challenges facing humans, and a major contributor to this is the use of fossil fuels, which has led to a significant increase in carbon dioxide (CO2) emission levels.Efforts to reduce carbon dioxide have become the core of ESG investment and are also an investment that represents a company's future sustainability.Despite this situation, ESG funds still contain companies that emit large amounts of carbon dioxide.Although ESG investment has rapidly increased globally, it can be difficult to achieve economic growth alongside sustainable development.Large-scale companies can receive high environmental and ESG integrated ratings simply by having a plan to reduce carbon dioxide or a strategic goal to use renewable energy.The various intertwined future strategies and plans of these environmental rating pillars and the lack of transparency in ESG ratings make it difficult to uncover hidden factors in environmental ratings.These factors make it difficult for investors to know about carbon washing in ESG investments and operations, and may result in the inclusion of companies with high carbon dioxide emissions in ESG funds.In addition, at the time of the introduction of the carbon border tax, Korean companies may experience a significant decrease in export competitiveness, which may undermine the purpose of ESG and further delay the achievement of 2050 Net-Zero by the international agreement, the Paris Agreement, or make it difficult to achieve the goal.