Factors driving firms’ green investments. ESRI Research Bulletin June 2021.

Siedschlag, Iulia and Yan, Weijie (2021) Factors driving firms’ green investments. ESRI Research Bulletin June 2021. UNSPECIFIED.

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Abstract

Boosting firms’ investments in environmental protection (green investments) could speed up the transition to a climate-neutral economy and more sustainable long-term economic growth. Understanding what determines firms’ decisions to invest in assets such as equipment for pollution control and cleaner technologies is important for the design of policy measures aimed at improving environmental quality and resource efficiency by incentivising firms’ engagement in green investments. Existing evidence on what factors determine firms’ decisions to invest in environmental protection is still limited. To help address this evidence gap, we examined a range of factors underlying firms’ investments in equipment for pollution control and in equipment linked to cleaner technologies in Ireland’s industry sector. The factors included firm characteristics and external factors such as environmental regulations, competition and learning effects from other firms with green investments in the same industry and the same region. Given the variation of environmental regulations across countries, we further investigated whether the country of origin of foreign investors played a role in firms’ decisions to invest in environmental protection.

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