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1University of St.Gallen and Swiss Finance Institute; 2University of Bath; 3Durham University
Discussant: Felix von Meyerinck (Lake Lucerne Institute)
Higher exposure to competition – measured by product fluidity – is associated with higher carbon emissions. This result is robust to using instrumental variables to obtain exogenous variation in fluidity and also holds when using only reported emission data, excluding estimated emissions. The relationship between competition and carbon emissions is stronger for firms in areas less concerned about climate change and areas with weaker social norms. Short-termism does not explain the results, as the emissions-competition link is at least as strong for firms with longer-term-oriented shareholders. Our findings suggest that promoting competition may be at odds with climate change abatement.
9:30am - 10:00am
Mutual funds’ appetite for sustainability in European Auto ABS
Carmelo Latino, Loriana Pelizzon, Max Riedel, Yue Wang
Leibniz Institute for Financial Research SAFE, Germany
Discussant: Yue Xiang (Durham University)
Using hand-collected data on European auto asset-backed securities (Auto ABS), we examine the role of mutual funds in financing the transition to zero-emission mobility. Mutual funds, particularly those with a green mandate, tend to have a higher exposure to sustainability-transparent Auto ABS and tend to allocate more capital to deals with a higher proportion of electric vehicles. However, we find no clear preference for portfolios with lower average CO2 emissions. This behaviour suggests that, in the absence of a framework for green securitizations, investors rely on sustainability proxies that are associated with the lowest disclosure processing costs. Our analysis provides important new evidence on how standardized sustainability disclosures at both the prospectus and loan levels could influence asset allocation.
10:00am - 10:30am
Insurers' coal underwriting policies
Olimpia Carradori1,2, Felix von Meyerinck1, Zacharias Sautner1,2
1Universität Zürich, Switzerland; 2Swiss Finance Institute
Discussant: Max Riedel (Leibniz Institute for Financial Research SAFE)
Insurance companies can facilitate the net-zero transition by restricting insurance coverage for fossil fuel projects. We study the adoption, structure, and effects of carbon underwriting policies by the world's largest insurance groups. While such policies have become more prevalent and restrictive over time, their design and enforcement remain highly heterogeneous. Leveraging new data on U.S. coal mine insurance, we document that coal policies reduce the number of insured coal mines by 17%, insured coal volumes by 58%, and increase insurer-mine relationship terminations by 20pp. Nonetheless, some insurers with coal policies expand their coal underwriting.
