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Out of sight, out of mind: Divestments and the global reallocation of pollutive assets

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  • Berg, Tobias
  • Ma, Lin
  • Streitz, Daniel

Abstract

We analyze firms' carbon reduction strategies worldwide and identify one key channel: large, primarily European firms facing increased investor pressure divest pollutive assets to firms that are less in the limelight. There is no evidence of increased engagement in other emission reduction activities. We estimate that 369 million metric tons (mt) of CO2e are reallocated via divestments in the post-Paris Agreement period, shifting pollutive assets from Europe to the rest of the world. Our results indicate significant global asset reallocation effects and imply that responsible investors who want to truly invest responsibly need to monitor firms' divestment strategies closely.

Suggested Citation

  • Berg, Tobias & Ma, Lin & Streitz, Daniel, 2024. "Out of sight, out of mind: Divestments and the global reallocation of pollutive assets," SAFE Working Paper Series 436, Leibniz Institute for Financial Research SAFE.
    • Handle: RePEc:zbw:safewp:308042
    DOI: 10.2139/ssrn.4368113
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    References listed on IDEAS

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    2. Comello, Stephen & Reichelstein, Julia & Reichelstein, Stefan, 2021. "Corporate Carbon Reduction Pledges: An Effective Tool to Mitigate Climate Change?," Research Papers 3955, Stanford University, Graduate School of Business.
    3. Rahel Aichele & Gabriel Felbermayr, 2015. "Kyoto and Carbon Leakage: An Empirical Analysis of the Carbon Content of Bilateral Trade," The Review of Economics and Statistics, MIT Press, vol. 97(1), pages 104-115, March.
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    Keywords

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    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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