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Central banks sowing the seeds for a green financial sector? NGFS membership and market reactions
Lion Fischer  1@  , Marc Steffen Rapp  1, 2@  , Johannes Zahner  3@  
1 : Philipps-Universität Marburg, School of Business and Economics
2 : Copenhagen Business School, Department of Accounting, Center for Corporate Governance
3 : Goethe-University Frankfurt

Central banks are under increasing pressure to integrate green monetary policies–measures that support the transition to a low-carbon economy–into their mandates. We leverage central bank announcements of participation in the Network for Greening the Financial System (NGFS) as a quasi-natural experiment to assess financial market reactions to unexpected central bank actions signaling a shift toward climate objectives–green monetary policy surprises. Using high-frequency event studies, we find significant positive abnormal returns for clean energy stocks in the days following NGFS participation announcements, with impacts comparable to those observed following the Paris Agreement and the strongest effects concentrated in low-carbon firms. A difference-in-differences (DiD) analysis further shows a sustained increase in green bond issuance following these surprises, highlighting the role of central bank signaling in catalyzing capital flows toward sustainable finance. Our findings suggest that central banks continue to prioritize their primary mandates of price stability and economic growth over climate objectives.


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