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Welfare Consequences of Sustainable Finance / Harrison Hong, Neng Wang, Jinqiang Yang.
- Format:
- Book
- Author/Creator:
- Hong, Harrison.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w28595.
- NBER working paper series no. w28595
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2021.
- Summary:
- We model the welfare consequences of portfolio mandates that restrict investors to hold firms with net-zero carbon emissions. To qualify for these mandates, value-maximizing firms have to accumulate decarbonization capital. Qualification lowers a firm's required rate of return by its decarbonization investments divided by Tobin's q, i.e., the dividend yield shareholders forgo to address the global-warming externality. The welfare-maximizing mandate approximates the first-best solution, yielding welfare gains compared to laissez faire by mitigating the weather disaster risks resulting from carbon emissions. Our model generates transitions to steady-state decarbonization-to-productive capital ratios that we use to evaluate the optimality of proposed net-zero targets.
- Notes:
- Print version record
- March 2021.
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