The Review of Corporate Finance Studies 2026

Greening Thy Neighbor: How the U.S. Inflation Reduction Act Drives Climate Finance Globally

Daniel Marcel te Kaat¹; Alexander Raabe²; YUANJIE TIAN³

¹ University of Groningen · ² Asian Development Bank, Philippines, and Centre for Applied Macroeconomic Analysis at the Australian National University , · ³ Southwestern University of Finance and Economics

Abstract

Using granular data on global investment funds in difference-in-differences regressions around the announcement of the U.S. Inflation Reduction Act (IRA), we identify a novel international spillover channel of green industrial policies. Sustainable global investment funds received more inflows with the act announcement, in turn increasing their cross-border portfolio investments worldwide. Recipient economies better prepared to address climate change benefited most from sustainable global funds’ additional investments. Our results are stronger for funds with a larger portfolio share invested in the United States and in IRA-targeted industries. Yet, we see strong international spillovers even for non-U.S.-domiciled sustainable funds investing entirely outside the United States. Thus, global investment funds have become an important conduit for the international spillover of climate policies.

DOI

10.1093/rcfs/cfag006

Language

en

Sources

crossref openalex

Cite

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