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The impact of carbon risk on the cost of debt in the listed firms in G7 economies: The role of the Paris agreement
Owolabi, A. Gozgor, Giray
Owolabi, A.
Gozgor, Giray
Publication Date
2024-11
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© 2024 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY license ( http://creativecommons.org/licenses/by/4.0/ ).
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openAccess
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2024-09-19
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Abstract
The Paris Agreement, signed in 2015, sets ambitious goals for diminishing greenhouse gas emissions and
restricting the rise in global temperature to achieve a less carbon-intensive and climate-resilient global economy.
The Paris Agreement marked a defining moment in the worldwide response to global warming and has significantly
affected the financial sector. Given this background, this research explores the effects of carbon risk on
the cost of debt (CoD) in 1428 listed firms across seven economies from 2011 to 2020. The paper also reflects the
post-Paris Agreement’s involvement and the ESG factors’ moderating effect in the empirical models. The study
finds a significant impact of carbon risk on CoD following the implementation of the Paris Agreement. Notably,
companies with higher carbon risk face higher borrowing rates. However, the effect of ESG on moderating the
relationship between carbon risk and CoD is found to be insignificant. Further analyses confirm this finding, as
individual pillars of ESG (governance and social aspects) also show insignificant moderating effects.
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Citation
Owolabi A, Mousavi MM, Gozgor G et al (2024) The impact of carbon risk on the cost of debt in the listed firms in G7 economies: The role of the Paris agreement. Energy Economics. 139: 107925.
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Article