The impact of green investors on stock prices

Cheng, Gong, Jondeau, Eric, Mojon, Benoit and Vayanos, Dimitri ORCID: 0000-0002-0944-4914 (2025) The impact of green investors on stock prices. Review of Finance. ISSN 1572-3097 (In Press)

Text (CJMV_2025_10) - Accepted Version Pending embargo until 1 January 2100. Available under License Creative Commons Attribution. Download (1MB)

Abstract

We study how green investors impact firms’ stock prices and cost of capital in a model where they track an index that progressively excludes the brownest firms and they trade with passive investors tracking a broad index and with active investors. Because stock demand elasticity is low with passive investors, the impact of green investors is significantly larger than in previous calibrations. That impact is further amplified when the brownest firms load heavily on climate transition risk. Although an announcement of future exclusion is reflected into brown firms’ current prices, the future price decline until exclusion is significant.

Item Type:	Article
Additional Information:	© 2025 The Author(s)
Divisions:	Finance
Subjects:	H Social Sciences > HG Finance G Geography. Anthropology. Recreation > GE Environmental Sciences H Social Sciences > HB Economic Theory
JEL classification:	G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing; Trading volume; Bond Interest Rates G - Financial Economics > G2 - Financial Institutions and Services > G23 - Pension Funds; Other Private Financial Institutions Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q5 - Environmental Economics > Q54 - Climate; Natural Disasters
Date Deposited:	14 Oct 2025 00:18
Last Modified:	14 Oct 2025 17:51
URI:	http://eprints.lse.ac.uk/id/eprint/129787

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