Companies are ramping up green innovations to combat climate change. But do these efforts boost shareholder wealth? A new study says no.

Many companies are pursuing green patents to show commitment to sustainability and innovation. These patents signal a firm's commitment to sustainability and innovation. Investors hope these green technologies will reduce climate change risk and increase wealth. But here's the question: Do these green innovations financially benefit shareholders?

A recent study by the ReBI’s Founding Director Dimitris Andriosopoulos examines over four decades of data from 1976 to 2019 to answer this question. Dimitris and his coauthors investigate how the stock market reacts when companies reveal their green innovations and examine whether these innovations translate into increased shareholder wealth.

They find that green innovations do not translate into higher shareholder wealth. Despite the widespread buzz around green technologies, the stock market's reception of green patent announcements is moderate or even negative. The findings remain same with the type of industry, level of investor attention, or climate risk exposure. The unexpected results challenge the conventional wisdom that green innovation is guaranteed to increase shareholder wealth.

Want to know more? Read the paper: Does Green Innovation Increase Shareholder Wealth?

Blog author: Umair Afzal (University of Strathclyde)