Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/250162 
Year of Publication: 
2021
Series/Report no.: 
JRC Working Papers in Economics and Finance No. 2021/12
Publisher: 
European Commission, Ispra
Abstract: 
How financial investors may react to policy events related to sustainability and climate change mitigation in particular, is a key question with implications for sustainable finance and financial stability. We address this question by carrying out a multi-period difference-in-difference approach on a confidential database of securities holdings of the European Central Bank, and we provide evidence of several effects related to the Paris Agreement. In aggregate, investors reduced their exposure to carbon-intensive assets in response to the agreement, and the trend reverted after the US withdrawal announcement. However, the reaction varies across categories and geographies of the securities holders, their ownership size, and the emissions of owned firms. In particular, transition risk has been taken up by less regulated financial institutions and the BRIC countries. Our results highlight that the redirection of global financial flows towards climate action requires clear and unanimous signals from the global community of policy makers.
Subjects: 
high-carbon firms
finance
Paris Agreement
stock holdings
US withdrawal
Creative Commons License: 
cc-by Logo
Document Type: 
Working Paper

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