Negative and Positive Screening. Investors assess the carbon footprint of issuers and identify the best and worst performers . The issuers with excessive carbon footprint are divested and fall into the 'exclusion lists' . Alternatively, the investors commit to pick only the best in class . As a bare minimum, screening approaches force more transparent environmental reporting from issuers. In the most optimistic scenario, to avoid exclusion lists issuers may progressively divest their non-green operations. In the long term, the combination of positive and negative screening will reward sustainable issuers relative to non-green sectors, thus reducing the cost of capital for less polluting entities.
IPCC
Climate Change 2022: Impacts, Adaptation and Vulnerability
IPCC Report