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Corporate Carbon-Risk and Credit-Risk: The Impact of Carbon-Risk Exposure and Management on Credit Spreads in Different Regulatory Environments

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  • Dumrose, Maurice
  • Höck, André

Abstract

Global efforts to mitigate climate change can affect a company's business outlook thereby creating risks and opportunities for companies and investors. We investigate the relation between a company's carbon-risk and its credit-risk. Moreover, we highlight the importance of carbon-risk management and the role of the regulatory environment in this context. Using a global sample of corporate bonds, we show that both carbon-risk exposure and carbon-risk management significantly affect credit-risk while the regulatory environment moderates these relations. Our results are relevant for policy makers, investors and companies, especially those with a high carbon-risk exposure.

Suggested Citation

  • Dumrose, Maurice & Höck, André, 2023. "Corporate Carbon-Risk and Credit-Risk: The Impact of Carbon-Risk Exposure and Management on Credit Spreads in Different Regulatory Environments," Finance Research Letters, Elsevier, vol. 51(C).
    • Handle: RePEc:eee:finlet:v:51:y:2023:i:c:s1544612322005918
    DOI: 10.1016/j.frl.2022.103414
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    More about this item

    Keywords

    Carbon risk; Credit risk; Climate change; Climate policy;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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