Abstract
We study the impact of climate patents on financial markets. Exploiting quasi-random variations in patent examiner leniency, we show that firms are rewarded with significant positive stock returns over a 12-month horizon when they receive fortuitous climate patent grants, compared with similarly innovative but unlucky firms. We ob-serve concomitant trends of reduced costs of capital, shareholder rotations towards environment-focused institutional investors and better environmental ratings. We do not observe similar reactions for other patents, including other green patents. We cor-roborate the distinctive nature of the market reaction to climate innovation by showing that it is amplified during periods of high attention to climate change, for firms with high climate exposure, and for first-time grants of climate patents. Random grants of climate patents do not produce improvements in the innovator’s operating perfor-mance or carbon emissions, but the underlying climate technologies do, suggesting that financial markets react rationally to the signal value of climate patent grants.
Keywords
climate-related patents; green patents; examiner leniency; climate change; implied cost of capital; ESG ratings; responsible investors; CO2 emissions.;
JEL codes
- G11: Portfolio Choice • Investment Decisions
- G23: Non-bank Financial Institutions • Financial Instruments • Institutional Investors
- G24: Investment Banking • Venture Capital • Brokerage • Ratings and Ratings Agencies
- O34: Intellectual Property and Intellectual Capital
Reference
Ulrich Hege, Sébastien Pouget, and Yifei Zhang, “Climate Patents and Financial Markets”, TSE Working Paper, n. 23-1400, January 2023, revised December 2024.
See also
Published in
TSE Working Paper, n. 23-1400, January 2023, revised December 2024