Climate Impact Investing

Tiziano De Angelis (), Peter Tankov () and Olivier Zerbib
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Tiziano De Angelis: School of Management and Economics, Department of Socio-Economic, Mathematical and Statistical Sciences, Univeristy of Turin, 10134 Torino, Italy; Collegio Carlo Alberto, 10122 Torino, Italy
Peter Tankov: Center for Research in Economics and Statistics–Ecole Nationale de Statistique et de l’Administration Economique, Institut Polytechnique de Paris, 91120 Palaiseau, France

Management Science, 2023, vol. 69, issue 12, 7669-7692

Abstract: This paper shows how green investing spurs companies to mitigate their carbon emissions by raising the cost of capital of the most carbon-intensive companies. Companies’ emissions decrease when the wealth share of green investors and their sensitivity to climate externalities increase. We show that the impact of green investors primarily governs companies’ long-run emissions. Companies are further incentivized to reduce their emissions when green investors anticipate tighter climate regulations and climate-related technological innovations. However, heightened uncertainty regarding future climate risks alleviates green investors’ pressure on the cost of capital of companies and pushes them to increase their emissions. Calibrated on U.S. data, our model suggests that, albeit effective, the impact of green investors remains limited given their current wealth share and practices.

Keywords: Climate finance; socially responsible investing; ESG; impact investing (search for similar items in EconPapers)
Date: 2023
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http://dx.doi.org/10.1287/mnsc.2022.4472 (application/pdf)

Related works:
Working Paper: Climate Impact Investing (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:69:y:2023:i:12:p:7669-7692

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