When Green Investors Are Green Consumers

93 Pages Posted: 5 May 2022 Last revised: 27 Mar 2024

See all articles by Maxime Sauzet

Maxime Sauzet

Boston University

Olivier David Zerbib

CREST, ENSAE, Institut Polytechnique de Paris

Date Written: November 17, 2022


We introduce investors with preferences for green assets to a general equilibrium setting in which they also prefer consuming green goods. Their preference for green goods induces consumption premia on expected returns, which counterbalance the green premium stemming from their preferences for green assets. Because they provide a hedge when green goods become expensive, brown assets command lower consumption premia, while green investors allocate a larger share of their portfolios toward them. Empirically, the green-minus-brown consumption-premia differential reached 80 basis points annually, and contributes to explaining the limited impact of green investing on the cost of capital of polluting firms.

Keywords: Sustainable Finance, Environmental Finance, Asset Pricing, Portfolio Choice

JEL Classification: G11, G12

Suggested Citation

Sauzet, Maxime and Zerbib, Olivier David, When Green Investors Are Green Consumers (November 17, 2022). Proceedings of the EUROFIDAI-ESSEC Paris December Finance Meeting 2022, Available at SSRN: https://ssrn.com/abstract=4098124 or http://dx.doi.org/10.2139/ssrn.4098124

Maxime Sauzet

Boston University ( email )

595 Commonwealth Avenue
Boston, MA 02215
United States

HOME PAGE: http://sites.google.com/view/maximesauzet/

Olivier David Zerbib (Contact Author)

CREST, ENSAE, Institut Polytechnique de Paris ( email )

5 Avenue Le Chatelier
Palaiseau, Paris 91120

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