Climate Impact Investing

Tiziano de Angelis (), Peter Tankov () and Olivier Zerbib ()
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Tiziano de Angelis: Collegio Carlo Alberto - UNITO - Università degli studi di Torino = University of Turin, UNITO - Università degli studi di Torino = University of Turin
Peter Tankov: CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - GENES - Groupe des Écoles Nationales d'Économie et Statistique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - GENES - Groupe des Écoles Nationales d'Économie et Statistique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique
Olivier Zerbib: CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - GENES - Groupe des Écoles Nationales d'Économie et Statistique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - GENES - Groupe des Écoles Nationales d'Économie et Statistique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique, BU - Boston University [Boston], EDHEC - EDHEC Business School - UCL - Université catholique de Lille

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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: impact investing; ESG; socially responsible investing; Climate finance (search for similar items in EconPapers)
Date: 2022-06-24
Note: View the original document on HAL open archive server: https://hal.science/hal-05415066v1
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Published in Management Science, 2022, 69 (12), pp.7669-7692. ⟨10.1287/mnsc.2022.4472⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05415066

DOI: 10.1287/mnsc.2022.4472

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