Climate Finance
Paper Session
Friday, Jan. 7, 2022 3:45 PM - 5:45 PM (EST)
- Chair: Marcin Kacperczyk, Imperial College London
Firm-Level Climate Change Exposure
Abstract
We introduce a method that identifies climate change exposure from earnings conference calls of 10,158 firms from 34 countries. The method adapts a machine learning keyword discovery algorithm and captures exposures related to opportunity, physical, and regulatory shocks associated with climate change. The exposure measures exhibit cross-sectional and time-series variations that align with reasonable priors, and these measures are better at capturing firm-level variation than are carbon intensities or ratings. The exposure measures capture economic factors that prior work has identified as important correlates of climate change exposure. In recent years, exposure to regulatory shocks negatively correlates with firm valuations.Socially Responsible Finance: How to Optimize Impact?
Abstract
We consider a general equilibrium productive economy with negative externalities. Investors seek to maximize their pecuniary and non-pecuniary returns, entrepreneurs profits. We show that a socially responsible fund is able to raise assets and improve social welfare iff: (i) it commits to finance only firms that cap their emissions and (ii) capital allocation is subject to frictions. If investors care about impact, the fund should prioritize investments in companies with acute negative externalities and facing strong capital search friction. It can amplify its impact by imposing restrictions on the suppliers that the firms it finances can use. Investing in sectors that pollute little under laissez-faire has no impact.Municipal Bond Insurance and Public Infrastructure: Evidence from Drinking Water
Abstract
Although bond insurance intermediaries are frequently relied upon by local governments for external financing, there is significant debate about the value that bond insurers provide. In this paper, we study U.S. drinking water to estimate the real effects of bond insurance on public infrastructure. We show that exogenous reductions in municipalities' access to bond insurance cause local governments to face higher borrowing costs, reduce external bond issuance, decrease investment in water infrastructure, and experience greater drinking water pollution. The evidence supports the view that well-functioning insurance markets for municipal debt have significant real effects on public infrastructure.Discussant(s)
Stefano Giglio
,
Yale University
Bryan Kelly
,
Yale University
Lubos Pastor
,
University of Chicago
Jess Cornaggia
,
Pennsylvania State University
JEL Classifications
- G1 - Asset Markets and Pricing