Template-Type: ReDIF-Paper 1.0
Author-Name: Gong Cheng
Author-X-Name-First: Gong
Author-X-Name-Last: Cheng
Author-Name: Eric Jondeau
Author-X-Name-First: Eric
Author-X-Name-Last: Jondeau
Author-Name: Benoit Mojon
Author-X-Name-First: Benoit
Author-X-Name-Last: Mojon
Author-Name: Dimitri Vayanos
Author-X-Name-First: Dimitri
Author-X-Name-Last: Vayanos
Title: The impact of green investors on stock prices
Abstract: We study the impact of green investors on stock prices in a dynamic equilibrium asset pricing model where investors are green, passive or active. Green investors track an index that excludes progressively the firms with the highest greenhouse gas emissions. Active investors maximize expected returns and can buy stocks of brown firms whereas passive investors hold an index of the entire market. Contrary to the literature, we find a large fall in the stock prices of the high-emitting firms that are excluded and in turn an increase in stock prices of greener firms when the exclusion strategy is announced and during the transition process. The immediate and large effects at the announcement date yield a first-mover advantage to green investors that adopt the decarbonization strategy early. This large price impact comes from the imperfect substitution of stocks among investor populations. A smaller size of active investors relative to green investors amplifies the price impact of green investment.
Creation-Date: 2023-09
File-URL: https://www.bis.org/publ/work1127.pdf
File-Format: Application/pdf
File-Function: Full PDF document
File-URL: https://www.bis.org/publ/work1127.htm
File-Format: text/html
Number: 1127
Keywords: asset pricing, green investing, passive investing, portfolio rebalancing
Classification-JEL: G12, G23, Q54
Handle: RePEc:bis:biswps:1127