Corporate Carbon-Risk and Credit-Risk: The Impact of Carbon-Risk Exposure and Management on Credit Spreads in Different Regulatory Environments

Global efforts to mitigate climate change can affect a company's business outlook thereby creating risks and opportunities for companies and investors. We investigate the relation between a company's carbon-risk and its credit-risk. Moreover, we highlight the importance of carbon-risk management and the role of the regulatory environment in this context. Using a global sample of corporate bonds, we show that both carbon-risk exposure and carbon-risk management signifi-cantly affect credit-risk while the regulatory environment moderates these relations. Our results are relevant for policy makers, investors and companies, especially those with a high carbon-risk exposure.