Environmental Impact Investing

60 Pages Posted: 13 Apr 2020 Last revised: 14 Jul 2020

See all articles by Tiziano De Angelis

Tiziano De Angelis

University of Manchester

Peter Tankov

ENSAE Paris

Olivier David Zerbib

Tilburg University - Tilburg University School of Economics and Management; University of Claude Bernard Lyon 1 - Institute of Finance and Insurance Science (ISFA); National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST)

Date Written: July 14, 2020

Abstract

This paper shows how green investing spurs companies to reduce their greenhouse gas emissions by raising their cost of capital. Companies' emissions decrease when the proportion of green investors and their environmental stringency increase. However, heightened uncertainty regarding future environmental impacts alleviates the pressure on the cost of capital for the most carbon-intensive companies and pushes them to increase their emissions. We provide empirical evidence supporting our results by focusing on United States stocks and using green fund holdings to proxy for green investors' beliefs. When the fraction of assets managed by green investors doubles, companies' carbon intensity drops by 5% per year.

Keywords: Environmental finance, socially responsible investing, ESG, impact investing

JEL Classification: G12, G11

Suggested Citation

De Angelis, Tiziano and Tankov, Peter and Zerbib, Olivier David, Environmental Impact Investing (July 14, 2020). Available at SSRN: https://ssrn.com/abstract=3562534 or http://dx.doi.org/10.2139/ssrn.3562534

Tiziano De Angelis

University of Manchester ( email )

Oxford Rd. M13 9PL
Manchester
United Kingdom

Peter Tankov (Contact Author)

ENSAE Paris ( email )

92245 Malakoff Cedex
France
91400 (Fax)

Olivier David Zerbib

Tilburg University - Tilburg University School of Economics and Management ( email )

PO Box 90153
Tilburg, 5000 LE Ti
Netherlands

University of Claude Bernard Lyon 1 - Institute of Finance and Insurance Science (ISFA) ( email )

50, Avenue Tony Garnier
Lyon Cedex 07, 69366
France

National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST) ( email )

5 avenue Henry Le Chatelier
Palaiseau, 91764
France

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