Michele Cascarano

Wednesday, 31 January - 3 PM - Seminar Room (DEM)


Does an increase in credit supply affect firms’ likelihood to invest in green technologies? To answer this question, we use text algorithms to extract information on green investments from the comments to the financial statements of Italian firms between 2015 and 2019. To identify the effect of credit supply, we use all loans disbursed by banks operating in Italy to construct a firm-specific time-varying instrument for credit availability. We find a large positive elasticity of green investments to credit supply. Consistent with a large capital intensity of green investments, this effect is concentrated among firms with higher availability of internal resources. Our results show that credit can be complemented by subsidies and market competition to spur green investments, particularly if combined with environmental awareness.