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Monetary Policy, Carbon Transition Risk, and Firm Valuation

Author

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  • Döttling, Robin
  • Lam, Adrian

    (University of Pittsburgh)

Abstract

We document that the stock prices of firms with higher carbon emissions respond more to monetary policy shocks around Federal Open Market Committee announcements, especially among firms that are more capital intensive, with lower ESG ratings, or with greater regulatory risk exposures. Examining real effects, we find that high-emission firms reduce emissions relative to low-emission firms, but disproportionately slow down these efforts when monetary policy is restrictive. Our results indicate that monetary policy has a stronger effect on the financial and environmental performance of firms more exposed to carbon transition risk, irrespective of whether central banks embrace a climate target.

Suggested Citation

  • Döttling, Robin & Lam, Adrian, 2023. "Monetary Policy, Carbon Transition Risk, and Firm Valuation," OSF Preprints kqdar_v1, Center for Open Science.
    • Handle: RePEc:osf:osfxxx:kqdar_v1
    DOI: 10.31219/osf.io/kqdar_v1
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    References listed on IDEAS

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