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Climate Impact Investing

Author

Listed:
  • Tiziano de Angelis

    (Collegio Carlo Alberto - UNITO - Università degli studi di Torino = University of Turin, UNITO - Università degli studi di Torino = University of Turin)

  • Peter Tankov

    (CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - GENES - Groupe des Écoles Nationales d'Économie et Statistique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - GENES - Groupe des Écoles Nationales d'Économie et Statistique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique)

  • Olivier David Zerbib

    (CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - GENES - Groupe des Écoles Nationales d'Économie et Statistique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - GENES - Groupe des Écoles Nationales d'Économie et Statistique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique, BU - Boston University [Boston], EDHEC - EDHEC Business School - UCL - Université catholique de Lille)

Abstract

This paper shows how green investing spurs companies to mitigate their carbon emissions by raising the cost of capital of the most carbon-intensive companies. Companies' emissions decrease when the wealth share of green investors and their sensitivity to climate externalities increase. We show that the impact of green investors primarily governs companies' long-run emissions. Companies are further incentivized to reduce their emissions when green investors anticipate tighter climate regulations and climate-related technological innovations. However, heightened uncertainty regarding future climate risks alleviates green investors' pressure on the cost of capital of companies and pushes them to increase their emissions. Calibrated on U.S. data, our model suggests that, albeit effective, the impact of green investors remains limited given their current wealth share and practices.

Suggested Citation

  • Tiziano de Angelis & Peter Tankov & Olivier David Zerbib, 2022. "Climate Impact Investing," Post-Print hal-05415066, HAL.
    • Handle: RePEc:hal:journl:hal-05415066
    DOI: 10.1287/mnsc.2022.4472
    Note: View the original document on HAL open archive server: https://hal.science/hal-05415066v1
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