Climate Transition Beliefs

 Abstract

We study expectations about the trajectory of the energy transition (climate transition beliefs) as drivers of “green” investment decisions and return expectations. In a survey of U.S. retail investors (N=1,007), we document considerable heterogeneity in climate transition beliefs at different horizons. Climate transition optimism positively correlates with expected green financial performance and preferences for green investments, especially for investors without strong pro-environmental preferences. A pre-registered information provision experiment (N=3,003) provides causal evidence on the link between climate transition beliefs and investment behavior. By influencing investments in green projects, the prevailing beliefs around the energy transition can have important self-fulfilling tendencies.