Heard the News? Environmental Policy and Clean Investments

Joelle Noailly; Laura Nowzohour; Matthias van den Heuvel
Authors registered in the RePEc Author Service: Laura Minu Nowzohour () and Joëlle Noailly

No 70-2021, CIES Research Paper series from Centre for International Environmental Studies, The Graduate Institute

Abstract: We build a novel news-based index of US environmental policy and examine how it relates to clean investments. Extracting text from ten leading US newspapers over the last four decades, we use text-mining techniques to develop a granular index measuring the salience of US environmental policy (EnvP) over the 1981-2019 period. We develop further a set of additional measures, namely an index of sentiment on environmental policy, as well as various topic-specific indices. We validate our index by showing that it correctly captures trends and peaks in the evolution of US environmental policy and that it has a meaningful association with clean investments, in line with environmental regulations supporting growing opportunities for clean markets. In firm-level estimations, we find that the salience of environmental policy in newspapers is associated with a greater probability of cleantech startups receiving venture capital (VC) funding and reduced stock returns for high-emissions firms most exposed to environmental regulations. At the aggregate level, we find in VAR models that a shock in our news-based index of renewable energy policy is associated with an increase in the number of clean energy VC deals and in the assets under management of the main benchmark clean energy exchange-traded fund. Overall, our EnvP index provides a lot of substantial information on environmental policy and can help assist the policy and financial community in understanding how these regulations are perceived by investors — providing many avenues for future research.

Pages: 54 pages
Date: 2021-11-22
New Economics Papers: this item is included in nep-big, nep-ene and nep-env
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Journal Article: Heard the news? Environmental policy and clean investments (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:gii:ciesrp:cies_rp_70

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