Climate Capitalists

Niels Gormsen, Kilian Huber and Sangmin S. Oh

No 20406, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: In theory, a cost of capital channel can incentivize green investments like a carbon tax. This channel requires that firms perceive the cost of green capital as lower than that of brown capital. Using hand-collected data, we show that green firms have indeed perceived their cost of capital to be 1 percentage point lower since 2016, when climate concerns by financial investors and governments surged. Moreover, some energy firms have used a lower cost of capital for their green divisions. The findings suggest that the cost of capital can incentivize capital reallocation toward greener investments across firms and within firms.

Keywords: ESG (search for similar items in EconPapers)
JEL-codes: G10 G12 G31 G32 G41 Q54 (search for similar items in EconPapers)
Date: 2025-07
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