Stefanie Kleimeier

New Working Paper

In our paper "Exporting Pollution", Itzhak Ben-David (Ohio State University), Michael Viehs (University of Oxford) and I present our latest research on the effects of environmental regulation on firms' carbon emission.

Despite awareness of the detrimental impact of CO2 pollution on the world climate, countries vary widely in how they design and enforce environmental laws. Using novel micro data about firms’ CO2 emissions levels in their home and foreign countries, we document firm behaviour that is in line with the Pollution Haven Hypothesis: Firms headquartered in countries with strict environmental policies perform their polluting activities abroad in countries with relatively weaker policies. These effects are stronger for firms in high-polluting industries and with poor corporate governance characteristics. Although firms export pollution, they nevertheless emit less overall CO2 globally in response to strict environmental policies at home.

New Publication              

Contreras, M.G., Bos, J.W.B., and S. Kleimeier, 2019, "Self-regulation in sustainable finance: The adoption of the Equator Principles", World Development 122, 306-324.

Critical to the success of the Sustainable Development Goals is the extent to which financial institutions are willing to adopt voluntary regulation aimed at ensuring their actions contribute positively. We study the adoption of the most well-known set of rules, the Equator Principles, by applying a network approach to a unique data set containing 18,729 collaborations of financial institutions funding projects between 2003 and 2014 worldwide. We find that those exposed to the highest level of peer pressure by adopters are 33% more likely to also adopt, compared to those that face the lowest level of peer pressure. Even without this peer pressure institutions that already collaborate with adopters are more susceptible to become adopters themselves. Finally, external pressure applied through public campaigns increases adoption, although particularly large (and presumably powerful) institutions are immune to this external pressure. Our findings are particularly relevant for success of the recently launched Principles for Positive Impact Finance, that are heavily inspired by the Equator Principles.

New Working Paper

In our paper “Credit Supply: Are there negative spillovers from banks’ proprietary trading?”, Michael Kurz (De Nederlandsche Bank) and I ask the question whether banks that heavily engage in proprietary trading reduce credit supply relative to their non-trading peers. We answer this question by looking at credit provided by the 135 leading banks in the global corporate loan market between 2003 and 2016. We find that banks with greater trading expertise supply less credit during economically stable times than their non-trading peers and even less during crisis times. This double effect can be attributed to US banks. International banks only reduce their credit supply during crises. We show that these spillovers from trading to credit supply have adverse consequences for the real economy as firms’ ability to invest in capital and expand their workforce is reduced. During a crisis, firms that rely on banks with high trading expertise are most severely affected. Overall, our results suggest that the mandates by global regulators to separate trading from commercial banking are well advised.