Do analysts matter for green investment? Evidence from the EU taxonomy

Abstract

To mitigate climate warming, one critical strategy is to redirect corporate investments toward low-carbon projects. This study explores the role that financial analysts' focus on environmental issues can play in this process. The research leverages the implementation of the EU Taxonomy Regulation for publicly listed companies in France during the period 2022–2023, which provides a comprehensive, precise, and standardized measure of corporate green investments. We use a firm-level measure of climate change exposure as a proxy for analysts’ attention on environmental issues. We find that analyst attention has a positive and significant effect on corporate green investments. Our results remain robust to potential self-selection bias and reverse causality. In a further analysis, we also find that our main result is driven by analysts' focus on opportunities. This study offers new insights into how analyst scrutiny impacts ESG practices and highlights the potential contributions of the EU Taxonomy Regulation.