Greening (Runnable) Brown Assets with a Liquidity Backstop

Eric Jondeau, Benoit Mojon and Cyril Monnet

No 21-22, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: The momentum toward greening the economy implies transition risks that are new threats to financial stability. In particular, the expectation that other investors may exclude high carbon corporate emitters from their portfolio creates a risk of runs on brown assets. We show that runs can be contained by a liquidity backstop with an access fee that depends on the firm’s carbon intensity, while the interest rate on the liquidity lent through this facility is independent from its carbon intensity.

Keywords: Financial stability; Runs; Brown assets; Liquidity provision (search for similar items in EconPapers)
JEL-codes: G01 G18 G28 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2021-03
New Economics Papers: this item is included in nep-env
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Citations: View citations in EconPapers (4)

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Working Paper: Greening (runnable) brown assets with a liquidity backstop (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp2122

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