Green Investment by Firms: Finance or Climate Driven?

47 Pages Posted: 13 Jun 2022

See all articles by Fotios Kalantzis

Fotios Kalantzis

European Union - European Investment Bank

Helena Schweiger

European Bank for Reconstruction and Development (EBRD) - Office of the Chief Economist

Sofia Dominguez

Independent

Date Written: June 9, 2022

Abstract

There is limited research on the determinants of firms’ green investment strategies in developing regions despite their importance to meet global climate change targets. Understanding how changes in firm climate investment affect environmental performance is essential for policy makers and firms alike. Based on unique data from the joint European Bank for Reconstruction and Development–European Investment Bank–World Bank Group Enterprise Surveys, this paper empirically examines the role of access to finance and green management practices in firms’ green investment strategies. Based on logistic regressions, the econometric analysis finds a positive influence of green management practices on the number of mitigation measures implemented. By contrast, firms that are financially constrained are less likely to pursue many mitigation measures. Finally, the results do not show significant differences in the impact of financial constraints on the type of green investment, but indicate that better green management practices lead to a higher likelihood of investing in both capital- and non-capital-intensive green measures.

Keywords: finance constraints, green management practices, mitigation strategies

JEL Classification: D22, L23, G32, L20

Suggested Citation

Kalantzis, Fotios and Schweiger, Helena and Dominguez, Sofia, Green Investment by Firms: Finance or Climate Driven? (June 9, 2022). EBRD Working Paper No. 268, Available at SSRN: https://ssrn.com/abstract=4132545 or http://dx.doi.org/10.2139/ssrn.4132545

Fotios Kalantzis

European Union - European Investment Bank

98-100 Boulevard Konrad Adenauer
L-2950
Luxembourg

Helena Schweiger (Contact Author)

European Bank for Reconstruction and Development (EBRD) - Office of the Chief Economist ( email )

One Exchange Square
London EC2A 2JN
United Kingdom

HOME PAGE: http://www.helenasch.net

Sofia Dominguez

Independent

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