Environmental Lobbying, Innovation, and the Green Transition

The competitive challenges and regulatory uncertainty associated with the green transition incentivize firms to both innovate and influence environmental policy. While much attention has focused on green innovation, we examine firms’ lobbying choices. We develop a method to identify “green†and “brown†environmental lobbying. We find that firms’ lobbying is not aligned with their innovation efforts: many green innovators engage in significant brown lobbying. The direction of environmental lobbying is an informative signal of firms’ true environmental stances and predicts real actions, such as emissions. Despite the informativeness of lobbying, neither environmental ratings nor UNPRI signatories’ investments incorporate this signal.