A New Approach to Measuring Global Governance Fragmentation: The Case of Sustainable Finance

With Stefan Renckens, Under Review

Abstract: Global governance has been increasing in complexity due to the continuous emergence of both formal and informal international and transnational initiatives, organizations and institutions. Is this proliferation producing a constructive specialization of labor, or fragmentation? This is a critical question underpinning the capacity of global governance to address some of the world’s biggest problems—climate change, global health, etc. Yet existing methods of mapping and measuring fragmentation in global governance—most notably, those applied in the governance architecture, regime complexity and organizational ecology literatures—have shortcomings with respect to variation in the unit of observation; variation in governance functions; the role of time and sequencing; and an implicit reference to fragmentation as a deviation from a unified whole. In this article, we develop a “governance space” method to measuring fragmentation that addresses these issues. We illustrate the value of this approach using the case of sustainable finance, using an original dataset of 111 Sustainable Finance Governance Initiatives (SFGIs) established between 2000-2020. We find that the sustainable finance governance landscape is more characterized by a division of labor between governance functions, issue clusters, and governance targets than a fragmented arena of duplicating and redundant efforts. As we argue, the governance space method can improve hypothesis testing by offering improved descriptive accuracy, but also by opening up new frontiers of variation to analyze.

Works in Progress.

Risk or Reward: Patterns of Firm Participation in Sustainable Finance Governance

Winner of the ISA-Canada Best Graduate Student Paper Award [Working Paper]

Abstract: Sustainable finance is a rapidly expanding arena of global governance with substantial private sector engagement. Far from being a club of firms from climate progressive countries however, national representation among the numerous new governance initiatives is surprisingly diverse. In an effort to make sense of what country characteristics push firms towards involvement in transnational governance initiatives that address climate change and the financial system, I examine existing literature and derive hypotheses focusing on political, economic, and sociological factors. Using participation data from 46 initiatives spanning 2000-2020, the results point to sectoral composition driving variation within countries, and wealth, climate laws, and environmental civil society explaining variation between countries. Substantively, the analysis suggests sustainable finance may be responding to societal environmental concerns more than regulatory risks, to the extent that the participation is nationally driven. At the same time, many prominent theories of global governance including those that describe post-regulatory adjustment, varieties of capitalism, or governance gap filling as critical push factors are contested. Such a systematic analysis raises questions about the external validity of existing theories and encourages scholars to re-consider the scope conditions of existing explanations.

Embedded Clubs: Membership, Reputational Risk, and the Marketization of the UN Global Compact

With Inhwan Ko [In Progress]

Abstract: The UN Global Compact has, for over twenty years, invited business executives from around the world to commit to principles upholding human rights. Its membership continues to grow globally, year and after. And yet, as a “club” with minimal requirements and limited enforcement mechanisms for non-compliance, it’s generally recognized as a weak indicator for corporate social responsibility. Given this widespread recognition in the business community, how does a club predicated on offering reputational benefits continue to grow when the strength of its signal is so tenuous? In this paper, we argue that club size can grow despite declines in marginal benefits within the club because of the way in which clubs become embedded in market infrastructure, producing private benefit spillovers from participating. We test this argument through a difference-in-difference analysis on the effect of rating agencies (S&P, Moody’s) incorporating Global Compact membership into ESG scores for publicly listed companies. We hypothesize that this “embedded” club membership accelerates the count of public companies in a given country, versus private companies who do not receive ESG scores, and find supporting evidence.