Global Carbon Divestment and Firms' Actions

40 Pages Posted: 29 May 2020 Last revised: 8 Jan 2021

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

Hulai Zhang

Tilburg University - Department of Finance

Date Written: January 8, 2021

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, public high-emission firms in the same countries tend to experience lower price valuation ratios, but they increase capital expenditure, research and development (R\&D) expenses, and green innovation activities, and reduce emissions resulting from their operations. We do not obtain the same results using private firms. Our results support the notion that divestment campaigns by financial institutions exert pressure on public 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 and Zhang, Hulai, Global Carbon Divestment and Firms' Actions (January 8, 2021). 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

Hulai Zhang

Tilburg University - Department of Finance ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

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