Template-type: ReDIF-Paper 1.0
Author-Name: Palea, Vera    
Author-Email:vera.palea@unito.it 
Author-Name: Drogo, Federico 
Author-Email: federico.drogo@unito.it
Author-Workplace-Name: University of Turin
Author-Workplace-Homepage: http://www.est.unito.it/
Title: Carbon Emissions and the Cost of Debt Financing: What Role for Policy Commitment, Firm Disclosure and Corporate Governance?
Abstract: Over time, investors have become increasingly aware of the risks associated with a transition to a low-carbon economy. 
This study investigates the association between carbon emissions and the cost of debt financing for a sample of firms from the Eurozone in 
the period 2010 – 2018. Results provide evidence that the risk premium required by lenders increases with carbon emissions. However, while 
the most polluting sectors were already charged before the Paris Agreement, and not further penalized in the subsequent period, our results 
indicate that the less polluting sectors started being charged a higher spread for their emissions only in the period after the Agreement. 
The Paris Agreement appears to be a turning point around which lenders have become aware of the strong commitment taken by policymaker in 
fighting climate change. Our findings also suggest that increased levels of disclosure on climate-related issues can mitigate corporate 
carbon risk. On the other hand, results are not compelling when we consider the effect of control mechanisms, such as external verification 
for emissions, board oversight of carbon risk and the presence of emission reduction targets, on the cost of debt.
Length: pages 47
Creation-Date: 2020-02
File-URL: https://www.est.unito.it/do/home.pl/Download?doc=/allegati/wp2020dip/wp_02_2020.pdf
File-Format: Application/PDF
Handle: RePEc:uto:dipeco:202002