Carbon Disclosures on Investors The Impact on French Manufacturing and Carbon Imports

This paper investigates the effects of the introduction of Article 173 of the 2015 Energy Transition for Green Growth (LTECV) Act on French firm-level manufacturing outcomes, with a specific focus on international trade dynamics. The carbon disclosure regulation requires institutional investors and asset managers to publicly disclose the carbon footprint of their portfolios, as well as their exposure to climate risks and their mitigation strategies. Employing a difference-in-differences approach and merging French corporate tax returns and customs data with OECD data on the carbon content of trade (TeCO2), findings show that a 10 percentage point increase in exposure to the regulation is associated with a statistically significant 5.84% drop in firm-level imported carbon emissions. Nevertheless, exposure is also associated with decreases in firm size and in trade activity. Effects are also largely driven by the more financially constrained firms. Findings highlight that increasing investor scrutiny may constrain the continued access to external financing for firms within their portfolios and impact the conduct of daily business activities of these exposed firms. Overall, the paper underscores the real effects of policies that aim to increase climate transparency to help steer investor capital towards less financially risky and more sustainable assets and projects.