Finance and Accounting Research Seminar with Dr Xuan Wang

Title: Sustainable Investing and Public Goods Provision (co-authored with Ilaria Piatti (Queen Mary), Joel Shapiro (Oxford))

Abstract:
We model investors who are consequentialists - they take into account the amount of public good firms produce (e.g., carbon emission reductions). In an asset pricing model with production and public goods, we find that more environmentally conscious investors invest more overall, invest more in clean firms, and may invest more in dirty firms. Whether clean firms exhibit CAPM alphas depends on a comparison between the firm’s systematic risk and its relative public good contribution. There is underprovision of the public good. Lower government provision may lead to a surge in investment and government provision may be dominated by green subsidies.

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4077271