Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/312062 
Year of Publication: 
2024
Series/Report no.: 
CESifo Working Paper No. 11552
Publisher: 
CESifo GmbH, Munich
Abstract: 
Policymakers and researchers worry that the low-carbon transition may be inadvertently delayed by higher global interest rates. To examine whether green investment is especially sensitive to interest rate increases, we consider the effect of unanticipated monetary policy changes on the equity prices of green and brown European firms. We find that brown firms, measured in terms of carbon emission levels or intensities, are more negatively affected than green firms by tighter monetary policy. This heterogeneity is robust to different monetary policy surprises, emission measures, econometric methods, and sample periods, and it is not explained by other firm characteristics. This evidence suggests that higher interest rates may not skew investment away from a sustainable transition.
Subjects: 
monetary transmission
carbon premium
ESG
climate finance
JEL: 
E52
G14
Q54
Q58
Document Type: 
Working Paper
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