Can finance save the world? measurement and effects of coal divestment policies by banks

Abstract

measurement and effects of bank exit policies∗ daniel green boris vallee† harvard business school harvard business school january 13, 2024 abstract we study whether exit policies by financial institutions have financial and real consequences on the firms they target, using bank coal exit policies as a laboratory. in contrast to theories assuming high capital substitutability, we find large effects of these policies. bank exit policies negatively affect both the financing and operation of coal assets. substitution to other sources and providers of capital appears to be limited. coal power plants owned by firms exposed to bank exit policies are more likely to be retired, translating into lower co2 emissions. exit policies have reduced coal co2e emissions by an estimated one gigaton. ∗we are indebted to sayyam mubeen, jiawei fan, jipeng liu, and james blume for outstanding research assistance. we thank ian appel (discussant), malcolm baker, jonathan karpoff (discussant), jacopo ponticelli, paola sapienza, adi sunderam, luke taylor, ivan ivanov (discussant), victoria ivashina, conference and seminar participants at nber corporate finance, usc fom conference, colorado finance summit, harvard business school, ut austin, university of houston, texas a&m, university of wyoming, australian national university, johns hopkins university, university of rochester, university of illinois urbana-champaign, insead, and hec paris for their suggestions. we are grateful to reclaim finance, in …

Source: pdf_first_chars