Technological greenness and long-run performance

Abstract

Firms’ investments in green technology are crucial for investors’ alignment to the Net Zero target. However, it is still unclear whether firms that invest in green technologies are rewarded by the market, particularly in the long run. Using a science-based technological measure of greenness, we find that the adoption of sustainable technologies is associated with better future financial and operating performance. Firms with greener technologies do not just appeal to investors’ pro-social preferences but also represent better firms. The results are especially strong in countries characterized by higher financial development, and for firms with better climate-related disclosure.