Costa, Hélia, Demmou, Lilas, Franco, Guido and Lamp, Stefan (2024) The role of financing constraints and environmental policy on green investment. Economics Letters, vol.239.

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Despite ambitious carbon reduction targets set by policymakers worldwide, current investments fall well short of the net-zero emissions scenario. This paper investigates the impact of financing constraints (FCs) on green investment among large, publicly listed firms across diverse sectors and countries. We find that FCs significantly reduce the propensity to undertake green investments by 2.5 percentage points. This result is even more pronounced in a difference-in-differences framework when focusing on the exogenous increase in financing costs resulting from the Great Financial Crisis of 2007/08. The study reveals further that the negative impact of FCs can be reduced by market-based environmental policies.

Item Type: Article
Language: English
Date: June 2024
Refereed: Yes
Place of Publication: Amsterdam
Uncontrolled Keywords: Green investment, Financing constraints, CO2 emissions, Environmental policy stringency
Divisions: TSE-R (Toulouse)
Site: UT1
Date Deposited: 23 May 2024 06:29
Last Modified: 23 May 2024 06:30
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