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Household Climate Finance: Theory and Survey Data on Safe and Risky Green Assets

Author

Listed:
  • Shifrah Aron-Dine
  • Johannes Beutel
  • Monika Piazzesi
  • Martin Schneider

Abstract

This paper studies green investing in a quantitative asset pricing model with heterogeneous investors calibrated using high-quality, representative survey data of German households. We find substantial heterogeneity in green taste for both safe and risky green assets throughout the wealth distribution. Model counterfactuals show nonpecuniary benefits and hedging demands currently make green equity more expensive for firms. Yet, these taste effects are dominated by optimistic expectations about green equity returns, lowering firms' cost of green equity to a greenium of 1%. Looking ahead, we use our model to trace out the aggregate effects of information provision in an RCT and find green equity investment could potentially double when information about green finance spreads across the population. Regarding safe green assets, our model counterfactuals show that if green deposits could be offered at a 50 basis point interest rate spread, aggregate green investments in the economy could quadruple in the medium run.

Suggested Citation

  • Shifrah Aron-Dine & Johannes Beutel & Monika Piazzesi & Martin Schneider, 2024. "Household Climate Finance: Theory and Survey Data on Safe and Risky Green Assets," NBER Working Papers 32615, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:32615
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    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • F0 - International Economics - - General

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