Carbon emissions and the cost of debt in the eurozone: The role of public policies, climate‐related disclosure and corporate governance
| Autor: | Federico Drogo, Vera Palea |
|---|---|
| Rok vydání: | 2020 |
| Předmět: |
Carbon Disclosure Project (CDP)
Strategy and Management Risk premium corporate governance Geography Planning and Development Control (management) Public policy Climate change Sample (statistics) Paris Agreement 010501 environmental sciences Management Monitoring Policy and Law 01 natural sciences 0502 economics and business cost of debt Business and International Management 0105 earth and related environmental sciences cost of debt carbon emissions climate-related disclosure corporate governance Paris Agreement Carbon Disclosure Project (CDP) Eurozone Corporate governance 05 social sciences climate-related disclosure International economics Cost of capital Greenhouse gas Business carbon emissions Eurozone 050203 business & management |
| Zdroj: | Business Strategy and the Environment. 29:2953-2972 |
| ISSN: | 1099-0836 0964-4733 |
| Popis: | Over time, investors have become increasingly aware of the risks associated with a transition to a low‐carbon economy. This study investigates the association between carbon emissions and the cost of debt financing for a sample of firms from the eurozone in the period 2010–2018. The results provide evidence that the risk premium required by lenders increases with carbon emissions. However, although the most polluting sectors were already charged before the Paris Agreement, and not further penalised in the subsequent period, our results indicate that the less polluting sectors started being charged a higher spread for their emissions only in the period after the Agreement. The Paris Agreement appears to be a turning point around which lenders have become aware of the strong commitment taken by policymakers in fighting climate change. Our findings also suggest that increased levels of disclosure on climate‐related issues can mitigate corporate carbon risk. On the other hand, the results are not compelling when we consider the effect of control mechanisms, such as external verification for emissions, board oversight of carbon risk and the presence of emission reduction targets, on the cost of debt. Taken as a whole, the results demonstrate the effectiveness of public policies in driving lenders' allocation decisions as well as the role of climate‐related disclosure in mitigating the corporate cost of capital. As such, our findings have important implications for both policymaking in environmental regulation and managerial strategies. |
| Databáze: | OpenAIRE |
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