Professor Ralph De Haas will present the paper “Managerial and Financial Barriers to the Green Transition”.
Using data on 10,769 firms across 22 emerging markets, we show that both credit constraints and weak green management hold back corporate investment in green technologies embodied in new machinery, equipment and vehicles. In contrast, whether firms invest in measures whose main purpose is to abate pollution or to increase energy efficiency, is mostly determined by managerial quality and not by access to credit. Auxiliary data from the European Pollutant Release and Transfer Register reveal the climate impact of these organizational constraints. In areas where more firms are credit constrained and weakly managed, industrial facilities systematically emit more CO2 and other greenhouse gases. A counterfactual analysis shows that credit constraints and weak management have kept CO2 emissions 4.8% and 2.2%, respectively, above their level without such constraints. This is further corroborated by our finding that in areas where banks had to deleverage more due to the Global Financial Crisis, carbon emissions by industrial facilities remained 5.8% higher a decade later.