Abstract. Firms' investments in green technology are increasingly important for competitive positioning, yet their impact on long-run performance remains unclear. Using electricity capacity data for global utility firms as a laboratory, we construct a unique structural measure of technological greenness based on renewable versus fossil fuel physical infrastructure. We find that adopting sustainable technologies is followed by a long-run improvement in fundamentals that is only partially reflected in stock prices, yielding superior returns over a multi-year horizon. We show that these results partly reflect higher revenue growth rather than investor sentiment, revealing a consumer-based mechanism that likely extends beyond utilities.
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 ECGI Corporate Finance and Governance Conference at the Stevens Institute of Technology, 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.
Publication. Journal of Corporate Finance, forthcoming.