Do climate-oriented regulatory policies affect the flow of credit towards polluting firms? We match loan-level data to firm-level greenhouse gas emissions to assess the impact of the Paris Agreement. We find that, following this agreement, European banks reallocated credit away from polluting firms in relative terms. Specifically, euro area banks’ loan share to more polluting firms decreased by about 3percentage points compared to less polluting (or “green”) firms after the 2015 Paris Agreement (COP21). This result is stronger for banks that are well capitalized, have lower credit quality, and are less profitable.

Global warming is the defining challenge of our times. An emerging literature is investigating the interactions between climate change and financial markets. Climate finance is studying the pricing of climate risks across asset classes and the ways to channel public and private capital towards climate mitigation and adaptation investments. In 2019, the Journal of Corporate Finance launched a call for papers on the finance of climate change with the goal of publishing a special volume. In this context, we discuss how finance can help to address climate challenges, the contribution of the papers selected for the Special Issue and what we view as a broader climate finance research program.

We match firm-corporate governance characteristics with firm-level carbon dioxide (CO2) emissions over the period 2009–2019 to study the relationship between gender diversity in the workplace and firm carbon emissions. We find that a 1 percentage point increase in the percentage of female managers within the firm leads to a 0.5% decrease in CO2 emissions. We document that this effect is statistically significant, also when controlling for institutional differences caused by more patriarchal and hierarchical cultures and religions. At the same time, we show that gender diversity at the managerial level has stronger mitigating effects on climate change if females are also well-represented outside the organization, e.g. in political institutions and civil society organizations. Finally, we find that, after the Paris Agreement, firms with greater gender diversity reduced their CO2 emissions by about 5% more than firms with more male managers.

We document that localized policies aimed at mitigating climate risk can have unintended consequences due to regulatory arbitrage by firms. Using a difference-in-differences framework to study the impact of the California cap-and-trade program with U.S. plant-level data, we show that financially constrained firms shift emissions and output from California to other states where they have similar plants that are underutilized. By contrast, unconstrained firms do not make such adjustments. Overall, unconstrained firms do not reduce their total emissions, whereas constrained firms increase their total emissions after the cap-and-trade rule, undermining the effectiveness of the policy.

Can we reduce the damage from climate change by investing in seawalls, stilts, or other forms of adaptation? Focusing on the case of severe storms in the US, I develop a macro heterogeneous-agent model to quantify the interactions between adaptation, federal disaster policy, and climate change. The model departs from the standard climate damage function and incorporates the damage from storms as the realization of idiosyncratic shocks. Using the calibrated model, I infer that adaptation capital comprises approximately 1% of the US capital stock. I find that while the moral hazard effects from disaster aid reduce adaptation in the US economy, federal subsidies for investment in adaptation more than correct for the moral hazard. I introduce climate change into the model as a permanent increase in either or both the severity or probability of storms. Adaptation reduces the damage from this climate change by approximately one-third. Finally, I show that modelling the idiosyncratic risk component of climate damage has quantitatively important implications for adaptation and for the welfare cost of climate change.

We evaluate the impact of a training program aimed at improving the relational atmosphere in the workplace. The program encourages prosocial behavior and the use of professional language, focusing primarily on leaders’ behavior and leader-subordinate interactions. We implement this program using a clustered randomized design involving over 3,000 headquarters employees of 20 large corporations in Turkey. We evaluate the program with respect to employee separation, pro- and antisocial behavior, the prevalence of support networks, and perceived workplace climate. We find that treated firms have a lower likelihood of employee separation at the leadership level, fewer employees lacking professional and personal help, and denser, less segregated support networks. We also find that employees in treated corporations are less inclined to engage in toxic competition, exhibit higher reciprocity toward each other, and report higher workplace satisfaction and a more collegial environment. The program’s success in improving leader-subordinate relationships emerges as a likely mechanism to explain these results. Treated subordinates report higher professionalism and empathy in their leaders and are more likely to consider their leaders as professional support providers.

This article has been retracted. Please see this notice for details: https://doi.org/10.1093/rfs/hhaf003

The importance of curtailing undesirable behaviors and, ultimately, self-focused work climates in organizations is undeniable. This study examines how management control systems (MCSs), as a crucial part of a firm's formal ethical infrastructure, can contribute to this objective. We conceptualize an ethically focused MCS as one that communicates ethical values and motivates employees to act accordingly. Our study is based on data from a sample of 120 department managers from 120 different firms. We show that department managers' perceptions of the extent to which the MCS imposed on them is ethically focused are associated with a reduction in their counterproductive work behaviors (CWBs). We also examine department managers' perceptions of peer managers' self-focused behaviors, as a core part of a firm's informal ethical infrastructure and find that peers' behaviors are not associated with an increase in CWBs of the department manager. However, we find some evidence that the negative association between an ethically focused MCS and managers' CWBs is limited when peers act in ways that are more self-focused. Finally, we find that CWBs of department managers are not only relevant in and of themselves, but they translate into more self-focused behaviors of department employees (as manifested in their work climates). Overall, this study suggests that, while including and emphasizing ethical content in the MCS is associated with less CWB and, in turn, with a work climate less focused on self, peer managers' behaviors are also seemingly important.

Using 40 countries’ subnational data, we estimate age-specific mortality-temperature relationships and extrapolate them to countries without data today and into a future with climate change. We uncover a U-shaped relationship where extre6me cold and hot temperatures increase mortality rates, especially for the elderly. Critically, this relationship is flattened by higher incomes and adaptation to local climate. Using a revealed-preference approach to recover unobserved adaptation costs, we estimate that the mean global increase in mortality risk due to climate change, accounting for adaptation benefits and costs, is valued at roughly 3.2% of global GDP in 2100 under a high-emissions scenario. Notably, today’s cold locations are projected to benefit, while today’s poor and hot locations have large projected damages. Finally, our central estimates indicate that the release of an additional ton of CO2 today will cause mortality-related damages of $36.6 under a high-emissions scenario, with an interquartile range accounting for both econometric and climate uncertainty of [−$7.8, $73.0]. These empirically grounded estimates exceed the previous literature’s estimates by an order of magnitude.