Showing off cleaner hands : mandatory climate-related disclosure by financial institutions and the financing of fossil energy

We investigate the real effects of mandatory climate-related disclosure by financialinstitutions on the funding of carbon-intensive industries. Our impact metric is the amountinvested into securities, bonds and stocks, issued by fossil fuel companies. A French law,which came into force in January 2016 in the aftermath of the Paris Agreement on climatechange, provides us with a quasi-natural experiment. The new regulation, unique in Europeat that time, requires institutional investors (i.e., insurers, pension funds and assetmanagement firms), but not banks, to report annually on both their climate-related exposureand climate change mitigation policy. Using a unique dataset of security-level portfolioholdings by each institutional sector in each euro area country, we compare the portfoliochoices of French institutional investors with those of French banks and all financialinstitutions located in other EA countries. We find that investors subject to the newdisclosure requirements curtailed their financing of fossil energy companies by some 40%compared to investors in the control group