The E-axes Forum on Climate Change, Macroeconomics, and Finance

Daniel Green

Young scholars’ webinars: “Can Finance Save the World? Measurement and Effects of Coal Divestment Policies by Banks”

Young Scholars' Webinar on Climate Finance and Economics

From the abstract:

We study whether divestment policies are an effective tool to address climate change, using coal lending bans by banks around the world as a laboratory. In contrast to theories arguing divestment is ineffective because capital is highly substitutable, we find large effects of these policies. We first develop a comprehensive measure of the strength of such bans, and document a large heterogeneity along this dimension. Using a shift-share instrument combining the lending ban strength measure and timing with borrower-bank relationships, we document that divestment affects the financing and operation of coal assets. We observe large effects of the policies on coal firm loan issuances, as well as on their outstanding debt and total assets. Substitution between divesting lenders and non-divesting ones, as well as with bond and equity issuances, appears to be limited. Coal power plants owned by firms exposed to bank divestment policies are more likely to be retired.



Alissa M. Kleinnijenhuis
Visiting Scholar (Finance Group), Imperial College Business School

Organizing Committee

Michael Barnett, Arizona State University
Alissa M. Kleinnijenhuis , Imperial College Business School
Ishita Sen, Harvard Business School
Diego Känzig , Northwestern University

Daniel Green

Daniel Green is an Assistant Professor of Business Administration in the Finance Unit at Harvard Business School. Professor Green’s research focuses on corporate finance, capital markets, and financial intermediation. His current research explores the relationship between the organization of financial markets, firm capital structure, and economic activity. He has studied this in a variety of settings, ranging from high yield debt markets to microfinance. Professor Green holds a PhD in Financial Economics from the MIT Sloan School of Management and a BA in Economics and Mathematics from the University of Rochester. Prior to his doctoral studies, he worked in the Capital Markets Group at the Federal Reserve Bank of New York.

Paper and slides

Can Finance Save the World? Measurement and Effects of Coal Divestment Policies by Banks (Paper)



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