Summary

Green public pension funds reduce corporate emissions not by divesting but by actively engaging with high-emitting firms they invest in—mainly through persuasion, not proxy fights—while divestment often correlates with no change or even increased emissions. Using political shifts and fund rebalancing to identify causality, the study shows that green ownership cuts emissions, whereas nongreen ownership does not. These results suggest corporate managers respond to investor preferences and that private capital markets, via engaged green investors, can help drive decarbonization without relying solely on regulation.

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