Does Foreign Institutional Capital Promote Green Growth for Emerging Market Firms?

Sophia Chiyoung Cheong, Jaewon Choi, Sangeun Ha, Ji Yeol Jimmy Oh

Research output: Contribution to conferencePaperResearchpeer-review

Abstract

We examine whether foreign institutional capital promotes green growth in emerging-market (EM) firms, using firm-level and China A-shares’ market-level inclusions in the MSCI Index as shocks to foreign capital. While foreign capital boosts output, emissions rise disproportionately in EM firms, leading to substantial increases in emissions intensity. In contrast, the emissions intensity of developed-market firms tends to decrease with foreign capital, enabling investors to offset deterioration in portfolio carbon metrics while benefiting from higher returns on EM investments. The increases in emissions are concentrated in countries with weaker environmental regulations and firms held by investors driven more by financial incentives. Our results suggest that foreign investors prioritize financial performance over portfolio carbon metrics when investing in EM firms.
Original languageEnglish
Publication date2024
Number of pages76
Publication statusPublished - 2024
EventCEBRA Annual Meeting 2024 - Goethe University, Frankfurt am Main, Germany
Duration: 28 Aug 202430 Aug 2024
https://cebra-events.org/

Conference

ConferenceCEBRA Annual Meeting 2024
LocationGoethe University
Country/TerritoryGermany
CityFrankfurt am Main
Period28/08/202430/08/2024
Internet address

Keywords

  • Carbon emissions
  • Climate risk
  • International institutional investors
  • Emerging markets
  • MSCI
  • ESG

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