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What drives capital to green companies in emerging markets: Evidence from investment funds

Author

Listed:
  • Etienne Lepers
  • Annamaria De Crescenzio

Abstract

This paper investigates the role of investment funds in financing green companies in emerging markets (EMs) and the factors influencing these allocations. Despite a global surge in “sustainable” investing, companies involved in carbon solutions, particularly in EMs, make up a small portion of reported sustainable investments. Using fund- and asset-level analyses on a detailed portfolio-level dataset of the 37 000 largest investment funds globally, this paper identifies key characteristics driving green investments, such as younger funds, retail investor funds, funds with domestic mandates and sustainable funds which are more inclined to invest in green companies and less in fossil fuels. Inclusion of EM green companies in benchmarks and diversified ownership in listed firms enhance green investments. Greater green allocation in EMs is linked to higher portfolio flow openness and economic freedom and are also influenced by climate-related factors such as exports in renewable manufacturing.

Suggested Citation

  • Etienne Lepers & Annamaria De Crescenzio, 2024. "What drives capital to green companies in emerging markets: Evidence from investment funds," OECD Working Papers on International Investment 2024/02, OECD Publishing.
    • Handle: RePEc:oec:dafaaa:2024/02-en
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    More about this item

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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