Ecological Preferences and the carbon Intensity of Corporate Investment
Michael Koetter, Felix Noth
IWH Discussion Papers,
No. 2,
2025
Abstract
Lowering carbon intensity in manufacturing is necessary to transform current production technologies. We test if local agents’ preferences, revealed by vote shares for the Green party during local elections in Germany, relate to the carbon intensity of investments in production technologies. Our sample comprises all investment choices made by manufacturing establishments from 2005-2017. Our results suggest that ecological preferences correlate with significantly fewer carbon-intensive investment projects while investments stimulating growth and reducing carbon emissions increase by 14 percentage points. Both results are more distinct in federal states where the Green Party enjoys political power and local ecological preferences are high.
Read article
Climate Policy and International Capital Reallocation
Marius Fourné, Xiang Li
IWH Discussion Papers,
No. 20,
2024
Abstract
This study employs bilateral data on external assets to examine the impact of climate policies on the reallocation of international capital. We find that the stringency of climate policy in the destination country is significantly and positively associated with an increase in the allocation of portfolio equity and banking investment to that country. However, it does not show significant effects on the allocation of foreign direct investment and portfolio debt. Our findings are not driven by valuation effects, and we present evidence that suggests diversification, suasion, and uncertainty mitigation as possible underlying mechanisms.
Read article
Media Response
Media Response April 2025 IWH: Das Elend in Zahlen in: Süddeutsche Zeitung, 11.04.2025 IWH: Die deutsche Flaute hält an in: Frankfurter Rundschau, 11.04.2025 Reint Gropp: Der…
See page
Green Transition
Green Transition Research and Policy Advice for Structural Change in the German Economy Dossier, 18.06.2024 Green Transition The green transition is a key topic of our time. In a…
See page
OVERHANG: Debt overhang and green investments
OVERHANG: Debt overhang and green investments - the role of banks in climate-friendly management of emission-intensive fixed assets Subproject 1: Policy Changes, Lending and…
See page
Research Clusters
Three Research Clusters Research Cluster "Economic Dynamics and Stability" Research Questions This cluster focuses on empirical analyses of macroeconomic dynamics and stability.…
See page
12.01.2024 • 2/2024
Green transition and the debt brake: Implications of additional investment for public finances and private consumption in Germany
The German Climate Protection Act stipulates, among other things, that greenhouse gas emissions in Germany are to be reduced by 65% by 2030 compared to 1990 levels. The green investments required to achieve this target are likely to amount to around 2.5% of gross domestic product each year. According to the medium-term projection of the Halle Institute for Economic Research (IWH), the associated additional government spending on public investment and support measures cannot be financed from projected tax revenues. It is therefore to be expected that the tax burden on households will increase and private consumption will be curbed accordingly, if both the current form of the debt brake and the greenhouse gas reduction targets are maintained.
Oliver Holtemöller
Read
Green Investing, Information Asymmetry, and Capital Structure
Shasha Li, Biao Yang
IWH Discussion Papers,
No. 20,
2023
Abstract
We investigate how optimal attention allocation of green-motivated investors changes information asymmetry in financial markets and thus affects firms‘ financing costs. To guide our empirical analysis, we propose a model where investors with heterogeneous green preferences endogenously allocate limited attention to learn market-level or firm-specific fundamental shocks. We find that a higher fraction of green investors in the market leads to higher aggregate attention to green firms. This reduces the information asymmetry of green firms, leading to higher price informativeness and lower leverage. Moreover, the information asymmetry of brown firms and the market increases with the share of green investors. Therefore, greater green attention is associated with less market efficiency. We provide empirical evidence to support our model predictions using U.S. data. Our paper shows how the growing demand for sustainable investing shifts investors‘ attention and benefits eco-friendly firms.
Read article
Department Profiles
Research Profiles of the IWH Departments All doctoral students are allocated to one of the four research departments (Financial Markets – Laws, Regulations and Factor Markets –…
See page
Projects
Our Projects 07.2022 ‐ 12.2026 Evaluation of the InvKG and the federal STARK programme On behalf of the Federal Ministry of Economics and Climate Protection, the IWH and the RWI…
See page
