A double-edged sword: capital market investments as a decarbonization policy of non-financial firms in the EU

PurposeThe present study addresses how capital market investment by real sector firms, often associated with low productivity and weak investment in the current literature under the financialization hypothesis, may in fact offer an environment-related advantage in the context of EU countries.Design/methodology/approachThe present study examines the effect of financialization on carbon emissions among firms operating in 12 EU countries, employing multivariate regression models.FindingsFirm-level data from 2002 to 2019 indicate that equity investment reduces corporate carbon emissions across the 12 EU countries analyzed.Originality/valueThe present study provides new empirical evidence on the relationship between financialization and carbon emissions in EU countries.