It sounds crazy, but one company successfully 'going green' can actually cause total global carbon emissions to go up.
March 26, 2026
Original Paper
Systematic Stewardship on the Waterbed
SSRN · 6465924
The Takeaway
This research identifies a 'waterbed effect' where firm-specific climate wins simply shift production or emissions to less-regulated competitors. It demonstrates that without universal carbon pricing, shareholder 'stewardship' and ESG initiatives can be counterproductive, effectively squeezing one part of the mattress and causing another to bulge.
From the abstract
<div> This paper examines the limits of corporate governance as a tool for advancing climate <span>transition. While capital market mechanisms, shareholder stewardship, say-on-climate votes, </span><span>and ESG-linked executive compensation are often presented as effective levers for greening </span><span>corporate behavior, their transformative capacity is systematically constrained. Building </span><span>on insights from financial economics and agency theory, the paper highlights incentive di