Title: The Road to Net-zero: A Mutual Fund Flow Investigation 

Co-authored with Koji Takahashi, Monetary and Economic Department, Bank for International Settlements

Lunch will be available from 12pm

Abstract:

We conduct a study on the time-varying investment patterns of green and brown energy equity mutual funds in the US market from 2005 to 2022, in response to climate risk. Our findings suggest that green fund flows increase significantly in response to climate risk shocks, while brown fund flows increase very little and even decrease from 2017 to 2021. This shift towards green investments may deter brown investments and dampen the negative effects of climate risk on industrial production growth, stock market returns, and volatility. The transition from brown to green funds, particularly the latter, accelerated up to early 2019, then slowed down and even reversed after November 2020, coinciding with changes in US climate policy. A hasty transition to green funds may benefit the stock market and output growth, while a quicker retreat from brown funds may have adverse effects. Our results align with theoretical predictions from previous studies by Pástor et al. (2021) and Nordhaus (2019).

Bio:

https://profiles.sussex.ac.uk/p427300-louisa-chen