Climate Impact Investing

Tiziano De Angelis, Peter Tankov and Olivier Zerbib

Carlo Alberto Notebooks from Collegio Carlo Alberto

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 United States 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)
Pages: 43 pages
Date: 2022
New Economics Papers: this item is included in nep-ene and nep-env
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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Journal Article: Climate Impact Investing (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:cca:wpaper:676

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