The Impact of Corporate Climate Action on Financial Markets: Evidence from Climate-Related Patents
Ulrich Hege Sebastien Pouget Yifei Zhang
We study the impact of climate-related patent approvals on financial markets. We exploit the quasi-random assignment of patent examiners as an exogenous shock in patent approvals to seek for causal interpretations. We find that innovative firms with lucky draws in the patent examiner lottery (involving climate-related patent applications) subsequently display positive and higher cumulative abnormal stock returns (both long-term and short-term) receive better environmental ratings enjoy a lower cost of capital and attract more responsible institutional investors compared with similarly innovative but unlucky firms. We also document that firms developing more climate-related technologies reduce more CO2 emissions improve energy efficiency and are more likely to announce new green products.