Climate policy and international capital reallocation

Marius Fourné and Xiang Li

No 20/2024, IWH Discussion Papers from Halle Institute for Economic Research (IWH)

Abstract: This study employs bilateral data on external assets to examine the impact of climate policies on the reallocation of international capital. We find that the stringency of climate policy in the destination country is significantly and positively associated with an increase in the allocation of portfolio equity and banking investment to that country. However, it does not show significant effects on the allocation of foreign direct investment and portfolio debt. Our findings are not driven by valuation effects, and we present evidence that suggests diversification, suasion, and uncertainty mitigation as possible underlying mechanisms.

Keywords: capital flows; climate change policy; green investment; international asset allocation (search for similar items in EconPapers)
JEL-codes: F21 F36 F64 (search for similar items in EconPapers)
Date: 2025, Revised 2025
New Economics Papers: this item is included in nep-ene, nep-fdg, nep-ifn, nep-int and nep-opm
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:iwhdps:302560

DOI: 10.18717/dpyfds-dy75

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