The Impact of Climate Change Transition Innovations on the Default Risk Evidence from Low-Carbon Patents in China

In the process of climate change mitigation and adaptation, the focus on climate risks driven by transition innovations has received widespread attention from governments, regulators and investors. Based on the identification of low-carbon patents through the Green and Low-carbon Technology Inventory in China, we construct low-carbon innovation measurements of listed firms in China from 2015 to 2021 then an empirical model is used to investigate the impact and mechanism of climate transition innovations on the default risk. The baseline regression model shows that low-carbon innovations can mitigate the default risk of firms. Moreover, our findings are supported by instrumental variable regressions that use time costs of innovation. In addition, the mediation effect demonstrates that investor attention, total factor productivity, and technology spillovers are paths for transition innovations to affect the default risk. This study reveals that low-carbon technological advances have a positive effect on climate transition risks. Further, it provides empirical evidence for listed companies to develop low-carbon innovations.