**1. Introduction**

Climate change is the shift in the state of climate that can be observed through variability of its components and lasts for a relatively long period of time, typically decades [1]. Long-term changes in climate are caused by natural factors, such as modulations of the solar cycle, as well as human factors. The current climate change is largely attributed to the high concentration of anthropogenically generated CO2 in the atmosphere. As at September 2020, the atmospheric CO2 concentration was around 414 ppm, a concentration way above a historic maximum of 300 ppm estimated at around 300 000 years ago [2]. The burning of fossil fuels and deforestation have accelerated the concentration of CO2 and other greenhouse gases in the

atmosphere. The increasing human population may result in more deforestation to establish farmland and human settlements. In the near term, the concentration of atmospheric CO2 is expected to continue rising, together with the resultant consequences of climate change.

A warming climate has undesirable consequences for biodiversity in many ecosystems and negatively impacts livelihoods, especially in developing countries with less resilient systems. Polar ice is melting at a rapid rate, increasing sea level that threatens to flood coastal communities and small islands. In the Arctic, summer sea ice extent has declined by 45% over the last 30 years, glaciers have lost their protective cap of perennial ice, permafrost is thawing rapidly and coastlines are experiencing high wave action and erosion [3]. Climate change may increase frequency and severity of pest and disease outbreaks [4]. Extreme weather events, such as floods, storms, hurricanes, droughts, wild fires and heatwaves are being frequently experienced with devastating consequences on livelihoods and ecosystems [5]. Severe and more frequent droughts in Zimbabwe and the increasing incidences of malaria, a disease that affects about 50% of the world's population, have all been attributed to climate change [5, 6]. In addition to impacting livelihoods at personal, family and community levels, climate change also impacts business activities.

International, regional and national actions, conventions, agreements and policies have been drafted to reverse and mitigate risks and impacts of climate change. Over 180 countries which form parties of the United Nations Convention on Climate Change (UNCCC) drafted the Paris Agreement in 2015 to tackle climate change. One of the objectives of the Paris Agreement is to hold the increase in global average temperature below 2°C above preindustrial levels [7]. All parties agreed to determine national contributions to reduce emission of greenhouse gases that will help achieve the objective. The nationally and voluntarily determined targets are renewed incrementally after five years. Limiting global average temperature increase to below 2°C above preindustrial level is strongly predicted to significantly reduce risks and impacts of climate change.

Regionally, under the EU's European green deal, the European climate law sets a goal of achieving carbon neutrality by 2050. The European climate pact encourages governments and local authorities to engage all citizens in climate change action, while the 2030 target plan aims to reduce greenhouse gas emissions by at least 55% by 2030 [8]. Other regional and continental organizations, such as the African Union, the Arab states and the Organization of American States, have similar plans to curb emission of greenhouse gases [9–11]. Nationally, governments are implementing different measures, including giving tax credits to companies that switch to clean energy, such as wind and solar energy. Countries are also tightening regulations on deforestation and vehicle fuel standards. International, regional and national not-for-profit organizations and civil society groups are aggressively involved in diverse activities to combat climate change, including advocacy, education and litigation.

Socially responsible investing (SRI) is a theme that advances investor morals and values. SRI is not necessarily a new theme as it can be traced back centuries ago. SRI is integrating personal values and societal concerns with investment decisions [12–14]. Restrictions to investing, called negative screening, in companies linked to weapons, tobacco, alcohol, gambling and slavery imposed by the church during the middle ages marked the early roots of SRI [15]. Under SRI, an investor intentionally invests to effect desirable social change. In recent history, investment restrictions were imposed on companies linked to colonialism, the Vietnam war, ponography and racism, among other issues [16]. It is emerging, though, that although negative screening can be useful to express ethical, religious or moral values of investors through their investment portfolios, for many, it may prove to be too restrictive [17]. *The Increasing Importance of Environmental, Social and Governance (ESG) Investing… DOI: http://dx.doi.org/10.5772/intechopen.98345*

Closely aligned with SRI is environmental, social and governance (ESG) investing, which involves integrating environmental, social and governance factors into fundamental investment analysis with the belief that the factors are material to financial performance. ESG investing takes a broader view than SRI by examining whether environmental, social and governance factors are important to performance, and therefore to the investment performance of a long-term portfolio [17]. In 1996, after recognizing the importance of ESG investing, the UN launched the United Nations Principles for Responsible Investment (UNPRI). The UNPRI is an investor led initiative to support investors when incorporating environmental, social and governance (ESG) factors into their investment decisions [18].

The aim of the chapter is to describe factors that are likely to elevate ESG investing in reducing greenhouse gas emissions. Due to its growing acceptance among investors, ESG investing should be recognized, just like international, regional and national initiatives, as vital to reduce risks and impacts of climate change. The objectives of the chapter are to (i) describe the concept of ESG investing, (ii) describe factors increasing the contribution of ESG investing in reducing emission of greenhouse gases, and (iii) discuss challenges of ESG investing. With rising consumer activism among a world population that is getting increasingly younger on average and more environmentally conscious, investors are likely to be under growing pressure to invest responsibly.
