Do carbon emissions affect the cost of capital?

Daniel Kim and Sébastien Pouget
Additional contact information
Daniel Kim: University of Waterloo [Waterloo]
Sébastien Pouget: TSM - Toulouse School of Management Research - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - CNRS - Centre National de la Recherche Scientifique - TSM - Toulouse School of Management - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse, TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

Post-Print from HAL

Abstract: We empirically study whether carbon emissions affect firms' cost of capital raised on conventional bond markets. We find that firms with higher carbon emissions face higher spreads in the secondary market but not in the primary market. We show that this gap is related to uncertainty about climate concerns that affects differently primary and secondary market. This gap is also affected by the reputation of underwriting dealers: high reputation promotes the incorporation of climate concerns into bond yields. Our findings imply that, on average, carbon emissions do not affect the cost of capital in bond markets, thereby reducing firms' financial incentives for decarbonization.

Keywords: Climate finance; Carbon premium; Bond markets; Green investors; Underwriting dealers (search for similar items in EconPapers)
Date: 2026-02
Note: View the original document on HAL open archive server: https://hal.science/hal-05470890v1
References: Add references at CitEc
Citations:

Published in Journal of Corporate Finance, 2026, 97 (102932), ⟨10.1016/j.jcorpfin.2025.102932⟩

Downloads: (external link)
https://hal.science/hal-05470890v1/document (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05470890

DOI: 10.1016/j.jcorpfin.2025.102932

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().