Conference Agenda

The Inflation Reduction Act (IRA) allocated $27 billion to the Greenhouse Gas Reduction Fund to funnel financing for clean energy and climate solutions. Government-funded Green Banks are delegated to administer the fund with a view to attract and amplify private capital investment in reducing emissions. In this paper, we examine the efficacy of Green Banks on mobilizing local investment in the context of climate-related startups. Pre- and post-introduction of IRA in Congress, we show a significant increase in venture capital deals and the total investment amount for local climate-related startups in counties where a Green Bank has issued loans. Our evidence is consistent with Green Banks de-risking climate ventures to facilitate a bottom-up green transition.

We construct a news-implied index of greenwashing salience. Our index reveals that greenwashing has become more prominent in the past five years. This increase was driven by skepticism towards the financial sector, specifically ESG funds, ESG ratings and green bonds. Furthermore, we build a measure of general anti-ESG sentiment from opinion pieces, and show that increases in greenwashing salience tend to be followed by increases in anti-ESG sentiment. In line with this finding, greenwashing salience affects investors' behavior. Following unexpected increases of greenwashing salience, retail investors invest less in all funds, and institutional investors invest less in funds with high ratings and self-labelled as sustainable.

We study how the EU Emissions Trading System (EU ETS) affects the stock prices of regulated firms. Using historically representative ownership measures for more than 15,000 installations required to comply with the EU ETS, we construct a comprehensive data set of allocated allowances and verified emissions aggregated to the parent company. Our empirical strategy exploits the release of compliance information in the EU ETS, changes in the European carbon allowance price in combination with cross-sectional variation in the ratio of allocated allowances to verified emissions, and a high-frequency identification approach around regulatory announcements to rule out any potential confounding effects. Our findings point towards a robust influence of carbon prices on stock prices starting from Phase II of the EU ETS in 2008. We find that the transmission of carbon prices to stock prices is not limited to European firms that are relatively heavily regulated by the system but also applies to non-European firms that are regulated to a lesser extent. Whereas carbon pricing mainly affects company valuations via the profitability channel in Europe, our results lend support to a risk-based channel for non-European firms.