N°24-22: Climate Transition Beliefs

We study expectations about the energy transition (climate transition beliefs) as drivers of “green” investment decisions and financial performance expectations. In a preregistered survey of U.S. retail investors (N=1,007), we document considerable heterogeneity in climate transition beliefs at different horizons. More optimistic climate transition beliefs are associated with higher green expected financial performance and investments, especially for investors without strong pro-environmental preferences. A pre-registered information provision experiment (N=3,003) provides causal evidence of the role of climate transition optimism in investment behavior. By influencing the availability of capital for green projects, the prevailing narratives and beliefs around the energy transition can have important self fulfilling properties.