How firms can make or break the green transition

We first show that firms differ widely in both their ability to access external funding and in the quality of their green management practices (Martin et al. An initial analysis confirms that credit constraints correlate negatively with green investments, whereas green-management quality correlates positively with such investments. Correlation does of course not imply causation, and it is clear that past green investments may influence green management practices or credit constraints – rather than the other way around. This instrumental-variables approach confirms our earlier results: both credit constraints and green management significantly affect the likelihood of green investments (Figure 1). Figure 1 Firm-level credit constraints, green management, and green investmentsSource: EBRD-WBG-EIB Enterprise Surveys, EBRD Banking Environment and Performance Survey, BvD Orbis, European Severe Weather Database, and authors’ calculations.