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Asset Overhang and the Green Transition

Hans Degryse, Tarik Roukny, Joris Tielens
CESifo, Munich, 2023

EconPol Forum 24 (1), 31-34
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  • Environmental technologies threaten dirty legacy portfolios of external financiers
  • “Asset overhang” refers to an investor’s incentive not to finance disruptive green firms in an attempt to protect exposed legacy positions
  • Empirically, asset overhang renders green disruptors up to 4.4 percentage points less likely to receive external finance
  • The presence of financiers with low asset overhang trigger systemwide incentives to fund green firms
  • Limited policy interventions aimed at reducing such overhang can alleviate financial barriers to the green transition

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