Speaker: Yasmine van der Straten, University of Amsterdam
Title: Funding the Fittest? Pricing of Climate Transition Risk in the Corporate Bond Market by Martijn Adriaan Boermans, Maurice Bun, Yasmine Van der Straten
Abstract: We study whether climate transition risk is priced in corporate bond markets and if investors value companies’ green innovation efforts. Using confidential bond-level holdings data and global firm-level data on carbon emissions and green innovation, we find a positive transition risk premium. This premium is smaller for emission-intensive firms that engage in green innovation, suggesting that investors value companies’ efforts to mitigate climate change. We show that European investors, in particular institutional investors, have a higher demand for bonds from emission-intensive firms that engage in green innovation and thus influence yield spreads related to climate transition risk.