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Firm climate investment: a glass half-full

Author

Listed:
  • Srivastava, Prachi

    (University College Dublin)

  • Bloom, Nicholas

    (Stanford University)

  • Bunn, Philip

    (Bank of England)

  • Mizen, Paul

    (King’s College London)

  • Thwaites, Gregory

    (University of Nottingham)

  • Yotzov, Ivan

    (Bank of England)

Abstract

We analyse the importance of climate‑related investment using a large economy‑wide survey of UK firms. Over half of firms expect climate change to have a positive impact on their investment in the medium term, with around a quarter expecting a large impact of over 10%. Around two thirds of these investments are expected to be in addition to normal capital expenditure, with some firms investing less elsewhere. Climate investments are expected mainly in switching to green energy sources and improving energy efficiency, and firms expect to finance these mainly using internal cash reserves. Climate investment will be driven by larger firms as well as those in more energy‑intensive sectors. Although firms are expecting to invest more resources in adapting to climate change, under reasonable assumptions, these investments are still not sufficient to meet the estimated targets implied by the UK Net Zero Pathway.

Suggested Citation

  • Srivastava, Prachi & Bloom, Nicholas & Bunn, Philip & Mizen, Paul & Thwaites, Gregory & Yotzov, Ivan, 2024. "Firm climate investment: a glass half-full," Bank of England working papers 1095, Bank of England.
    • Handle: RePEc:boe:boeewp:1095
    as

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    References listed on IDEAS

    as
    1. N. Bloom, 2016. "Fluctuations in uncertainty," Voprosy Ekonomiki, NP Voprosy Ekonomiki, issue 4.
    2. Maximilian Fuchs & Johannes Stroebel & Julian Terstegge, 2024. "Carbon VIX: Carbon Price Uncertainty and Decarbonization Investments," NBER Working Papers 32937, National Bureau of Economic Research, Inc.
    3. Marshall Burke & Solomon M. Hsiang & Edward Miguel, 2015. "Global non-linear effect of temperature on economic production," Nature, Nature, vol. 527(7577), pages 235-239, November.
    4. Bua, Giovanna & Kapp, Daniel & Ramella, Federico & Rognone, Lavinia, 2022. "Transition versus physical climate risk pricing in European financial markets: a text-based approach," Working Paper Series 2677, European Central Bank.
    5. Hensel, Jannik & Mangiante, Giacomo & Moretti, Luca, 2024. "Carbon pricing and inflation expectations: Evidence from France," Journal of Monetary Economics, Elsevier, vol. 147(C).
    6. Nicholas Bloom, 2009. "The Impact of Uncertainty Shocks," Econometrica, Econometric Society, vol. 77(3), pages 623-685, May.
    7. Adrien Bilal & Diego R. Känzig, 2024. "The Macroeconomic Impact of Climate Change: Global vs. Local Temperature," NBER Working Papers 32450, National Bureau of Economic Research, Inc.
    8. Accetturo, Antonio & Barboni, Giorgia & Cascarano, Michele & Garcia-Appendini, Emilia & Tomasi, Marco, 2022. "Credit supply and green Investments," CAGE Online Working Paper Series 615, Competitive Advantage in the Global Economy (CAGE).
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Firm data; Decision Maker Panel; climate change; investment;
    All these keywords.

    JEL classification:

    • C83 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Survey Methods; Sampling Methods
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D25 - Microeconomics - - Production and Organizations - - - Intertemporal Firm Choice: Investment, Capacity, and Financing
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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