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  • 2020
  • Working Paper

The ESG-Innovation Disconnect: Evidence from Green Patenting

By: Lauren Cohen, Umit G. Gurun and Quoc H. Nguyen
  • Format:Print
  • | Language:English
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Abstract

No firm or sector of the global economy is untouched by innovation. In equilibrium, innovators will flock to (and innovation will occur where) the returns to innovative capital are the highest. In this paper, we document a strong empirical pattern in green patent production. Specifically, we find that oil, gas, and energy producing firms—firms with lower Environmental, Social, and Governance (ESG) scores, and who are often explicitly excluded from ESG funds’ investment universe—are key innovators in the United States’ green patent landscape. These energy producers produce more, and significantly higher quality, green innovation. Our findings raise important questions as to whether the current exclusions of many ESG-focused policies—along with the increasing incidence of explicit divestiture campaigns—are optimal, or whether reward-based incentives would lead to more efficient innovative outcomes.

Keywords

ESG (Environmental, Social, Governance) Performance; Investment; Decision Making; Policy; Energy; Green Technology; Technological Innovation; Patents

Citation

Cohen, Lauren, Umit G. Gurun, and Quoc H. Nguyen. "The ESG-Innovation Disconnect: Evidence from Green Patenting." NBER Working Paper Series, No. 27990, October 2020. (Winner of the Fordham University Gabelli School of Business – PVH Corp. Global Thought Leadership Grant on Corporate Social Responsibility, 2020.)
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About The Author

Lauren H. Cohen

Finance
→More Publications

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More from the Authors
  • All Options on the Table: The Haber Family By: Lauren Cohen, Grace Headinger and Juan Ruiz
  • Baofeng's Philanthropic Efforts in China By: Lauren Cohen, Hao Gao, Bo Li and Zhaoheng Gong
  • Junson Capital (B): Digital Transparency In the Family Office By: Lauren Cohen, Hao Gao, Trang Duong, Grace Headinger and Keven Wang
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