Abstract. Firms’ investments in green technology are crucial for investors’ alignment to the Net Zero target. However, it is still unclear whether these investments are rewarded by the market. Using a science-based technological measure of greenness, we find that adopting sustainable technologies leads to a long-run improvement in fundamentals that is only partially reflected in stock prices. Correspondingly, firms with greener technologies achieve superior returns over a multi-year period and are better positioned for the transition to a low-carbon economy. These effects are especially pronounced in financially developed countries, during uncertain times, and among firms with better climate-related disclosure.
Coauthors. Stefano Battiston (U Zurich, U Venice, CEPR), and Irene Monasterolo (U Utrecht, CEPR).
Manuscript. You can download the paper here.
Working paper series. CEPR Discussion Paper No. 19337.
Presentations. The CEPR Climate Change and the Environment Symposium, the International Corporate Governance Conference on "CSR, The Economy, and Financial Markets" at Cardiff Business School, Nord University Business School, the Research in Behavioral Finance Conference, the Research Workshop Task Force on Banking Analysis for Monetary Policy at the European Central Bank, the European Securities and Markets Authority (ESMA) research conference on Environmental risks and ESG investing, the CREDIT international conference, the Vienna University of Economics and Business, the Behavioral Finance Working Group International Conference, the ECB-OECD workshop on "Navigating the path to net zero -- The interplay of climate, monetary and financial policies," the Financial Risks International Forum, and Utrecht University.