Global Carbon Divestment and Firms' Actions

32 Pages Posted: 29 May 2020

See all articles by Darwin Choi

Darwin Choi

The Chinese University of Hong Kong (CUHK) - CUHK Business School

Zhenyu Gao

The Chinese University of Hong Kong (CUHK) - CUHK Business School

Wenxi Jiang

CUHK Business School, The Chinese University of Hong Kong

Date Written: April 30, 2020

Abstract

We examine the actions of financial institutions and firms regarding greenhouse gas emissions. We find that financial institutions around the world reduce their exposure to stocks of high-emission industries after 2015, especially for those located in high-climate-awareness countries, suggesting that institutions are concerned about climate risks in recent years. In the presence of divestment, firms in the same countries tend to experience lower price valuation ratios, which make equity financing costlier, but they increase capital expenditure and research and development (R&D) expenses and reduce emissions resulting from their operations. Our results support the notion that divestment campaigns by financial institutions exert pressure on firms to adopt climate-friendly policies and decrease carbon footprints.

Keywords: Divestment, Carbon Emissions, Climate Awareness, Financial Institutions, Climate Change

JEL Classification: D83, G11, G15, G23, Q54

Suggested Citation

Choi, Darwin and Gao, Zhenyu and Jiang, Wenxi, Global Carbon Divestment and Firms' Actions (April 30, 2020). Available at SSRN: https://ssrn.com/abstract=3589952 or http://dx.doi.org/10.2139/ssrn.3589952

Darwin Choi (Contact Author)

The Chinese University of Hong Kong (CUHK) - CUHK Business School ( email )

Cheng Yu Tung Building
12 Chak Cheung Street
Shatin, N.T.
Hong Kong

Zhenyu Gao

The Chinese University of Hong Kong (CUHK) - CUHK Business School ( email )

Cheng Yu Tung Building
12 Chak Cheung Street
Shatin, N.T.
Hong Kong
(852)39431824 (Phone)

HOME PAGE: http://sites.google.com/site/gao515515/

Wenxi Jiang

CUHK Business School, The Chinese University of Hong Kong ( email )

Room 1250, Cheng Yu Tung Building
Chinese University of Hong Kong
Shatin, NT 06520
Hong Kong

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