Do carbon emissions affect the cost of capital? Primary versus secondary corporate bond markets

Sébastien Pouget and Daniel Kim
Additional contact information
Sébastien Pouget: University of Waterloo [Waterloo]
Daniel Kim: 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, 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

Working Papers 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: Underwriting dealers; Green investors; Bond markets; Carbon premium; Climate finance (search for similar items in EconPapers)
Date: 2025-12-04
Note: View the original document on HAL open archive server: https://hal.science/hal-05397676v1
References: Add references at CitEc
Citations:

Downloads: (external link)
https://hal.science/hal-05397676v1/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:wpaper:hal-05397676

Access Statistics for this paper

More papers in Working Papers from HAL
Bibliographic data for series maintained by CCSD ().