CorporateCostofDebtintheLow-carbon Tansition
ByFilippoMariaD’Arcangelo,TobiasKruse,Mauro PisuandMarcoTomasi
OECDWorkshop
CommentsbyElsaAllman
April19th,2024
Researchquestion
⊚ Whatistheeffectofclimatemitigationpoliciesandcorporate environmentalperformanceonsyndicatedloanspreads?
MainResults
⊚ Firmswithgoodenvironmentalperformance(emission intensity/patenting)havealowercostofdebt(loans),especiallywhen environmentalpoliciesarestringent.
⊚ FirmswithbetterESGscoresbenefitfromlowerloanspreadsbutare disconnectedfrommitigationpolicystringency.
◦ ESGscoresarenotsufficientlyinformativetoassessthepotential impactofclimate-changemitigationpoliciesonfirms.
⊚ Mitigationpoliciesaffectcapitalreallocationbystimulatinginvestment ingreenfirmsandreducingitinbrownfirms.
Overview
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Contribution
Literature
⊚ Pricingofclimaterisk
◦ Equitymarkets(egChava,2014;BoltonandKacperczyk,2021)
◦ Bonds(egSeltzer,L.,L.StarksandQ.Zhu,2022)
◦ Loans(egKleimeierandViehs,2016;Ehlers,PackeranddeGreiff, 2022)
Contribution
⊚ Usescountry-yearvariationofclimatepolicystringencyandfirm-level performancetodeterminetheeffectofmitigationpoliciesonloan spreads.
⊚ Differentiatesbetweenmarket-pullpolicies(emissionpricing)and technology-pushpolicies(technologysupportsubsidies).
⊚ Environmentalperformancemetricsfocusbothongreeninnovativeness andemissionintensity.
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EmpiricalSettingandAnalysis
Empiricaldesign
⊚ Paneldatasetof6,000loansacrossnearly1400firmsfortheyears 2002-2018,distributedin33countriesand71sectors
⊚ Erepresentsthefirm-levelenvironmentalperformancemetrics
◦ Emissionintensity
◦ Greeninnovation
⊚ Pisthedomesticclimatemitigationpolicyindicator
◦ OECDEnvironmentalPolicyStringency(EPS)indexandits sub-components
◦ Market-pullpolicies(C02tax)increasethedemandforthese technologies.
◦ Technology-pushpoliciesencouragethedevelopmentand adoptionofgreentechnologiesandpractices.
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Suggestions
GreenvsBrownfirms
⊚ Domitigationpoliciesaffectthegreenpremium(i.e.theloanspreadof brownfirmsminusthatofgreenfirms,everythingelseequal)?
⊚ Quantifythegreenloanpremium?
⊚ Identifygreenfirmsandconductmatchingforbrownfirmstoexamine theeffectofmitigationpolicies
AdditionalSuggestionsandpossibleextensions
⊚ InvestorsvsBanks(financialintermediaries):pricingclimateriskiskey tomaintainfinancialstabilityandlimitbankrisk-taking
⊚ Effectsofclimatepoliciesoncreditsupply(egamountofdebtvscostof debt)?
⊚ Examinetheroleoflenders(greenvsbrownbanks)andtheimpactof relationshiplending
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Overview
⊚ Veryinterestingpaperthatprovidesnovelinsightontheinfluenceof climatepoliciesandenvironmentalperformanceonthecostofdebt
⊚ AlsoprovidesinsightonESGinformationandtheeffectofclimate policiesoninvestment
Importantpolicyimplications
⊚ Improvingdisclosureandcomparabilityofemissiondata
⊚ EnhancingtheusefulnessofESGscores(andEpillarscores)
⊚ Encouragingfirmstoproduce(credible)corporatetransitionplansand tofinanceemissionreductions
Check-outthepackageofreportsrelatingtoTransitionPlansreleasedbythe NGFSonApril17th!
Summary
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