For more details have a look at our website!
Also check out the paper and the code repo!
Paper: arxiv.org/abs/2411.09856
Website: sites.google.com/view/investe...
Thank you to the amazing team who made this possible: xiaoxuanh.bsky.social
jzleibo.bsky.social
natashajaques.bsky.social

Despite a “first-principles” model, InvestESG captures the core incentive structures necessary to evaluate the policy in question. We hope that our study shows MARL as a promising tool to complement traditional empirical and theoretical methods for economics and policy researchers.

More broadly, we demonstrate the potential of using a MARL framework to inform policy debates in the field of climate change.

This indicates that this combination creates an immediate risk of bankruptcy for company agents, thereby strongly incentivizing their mitigation efforts.

Interestingly, our result also shows that company agents are more likely to mitigate when (1) economic losses caused by the climate event are uncertain (2) a stricter bankruptcy standard is imposed.

Q: What else can encourage the companies to mitigate?
A: Consistent with management science literature, providing more climate-related information in the observation space encourages climate mitigation in the agents.

Only when the investors are ESG-conscious enough, i.e., they care about the environment, can it significantly incentivize the companies to mitigate. We replicate the result in 10-by-10 and 25-by-25 cases to show its scalability.

A couple of cool observations we want to share:
Q: Is ESG disclosure all you need?
A: No. Adding ESG score to the observation space alone doesn’t incentivize enough mitigation.

How do we know how companies and investors would respond to an ESG disclosure mandate without the policy enacted? What if companies just greenwash to make themselves look good on the paper without actually mitigating? To answer the questions, InvestESG came to the rescue.

While mitigation causes near-term costs to individual companies, it reduces long-term climate risks, which benefits all agents. Investors make decisions based on their utility, which balances investment returns with ESG preferences. Each company and investor is simulated by an Independent PPO agent.

We believe multi-agent reinforcement learning (MARL) can be a powerful new tool for tackling large-scale socio-economic challenges, especially when it comes to predicting the potential impacts of a new policy. The simulation models two types of agents: companies and investors.

Specifically, we investigate the impact of the potential Environmental, Social, and Governance (ESG) disclosure mandate, a highly controversial SEC policy proposal that would require publicly traded companies to disclose climate-related risks, mitigation strategies, and greenhouse gas emissions.

In our latest work, we introduce InvestESG, a lightweight, GPU-efficient MARL environment, designed to study incentives surrounding corporate climate mitigation and climate risks. Check out the project website: sites.google.com/view/investe...