COP26 Event Series: Green investment and private capital

We start on the 5th of May with the very longest term outlook and a critique of economic modelling of climate impacts and pathways to better outcomes over the intermediate and long term. This session will look at the changing landscape of public investment, particularly in the United Kingdom and the United States. On the 12th of May we will then look at the private sector and how changing attitudes of investors is starting to effect changes in financial markets and their attitudes to financing projects. On the 19th of May we switch track to directly address the issues of climate finance in low- and middle-income countries and focus on investment and development of poverty reduction and sustainability for climate vulnerable populations. Finally, on the 26th of May we will look directly at the regulatory side, how externalities are priced into regulations, infrastructure provision and the move to a carbon neutral economy.

Introduction by Susan Hart, Dean of Durham University Business School followed by Thomas Renstrom and Laura Marsiliani Durham University Business School and Durham Energy Institute – Green investment and private capital.

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Since 1995, the net total assets of US funds incorporating Environmental, Social and Governance Factors has increased more than 400%. This has been a common trend in many countries. In this seminar we will focus on issues in connection to sustainable finance and private green investments and their role for protecting the environment. We will first explore the finance channel through which investors have an influence on corporate decision making, regarding pollution abatement and decarbonisation ('greener production'). We will present the theoretical equilibrium pricing of shares for firms with different environmental standards (the "Green Capital Asset Pricing Model"), together with evidence from green mutual funds. We will then analyse the firms’ incentives (through the capital market) in reducing pollution. In this context we also explore the role of the government, in particular the effect of pollution taxes and abatement subsidies. We will also investigate which types of corporations are more likely to be environmentally responsible and engage in pollution abatement and the reasons behind their decisions. We will conclude by assessing whether markets alone can provide environmental protection or if government intervention would be needed.