Dominika Ehrenbergerová, Simona Malovaná, Caterina Mendicino
We study how climate policies and significant events affect holdings of securities issued by low-carbon (green) and high-carbon (brown) firms. Using security-level data, we show that financial sector increased its holdings of green firms’ securities and reduced its holdings of brown firms’ securities following the Paris Climate Agreement and the 2019 UN Climate Action Summit. The COVID-19 pandemic had a similar effect, highlighting the role of the carbon risk premium. Conversely, the private non-financial sector increased its holdings of brown firms’ securities, indicating a shift of transition risks toward this sector. Lastly, home bias and the environmental performance of holder and issuer countries significantly influence these effects.
JEL codes: G11, G20, Q54
Keywords: Climate policies, COVID-19 pandemic, difference-in-differences, security-level data
Issued: October 2023
Download: CNB WP No. 11/2023 (pdf, 580 kB)