CLOs' Trading of Brown Loans when Climate Change Draws Attention
(2023)- Abstract
- Collateralized Loan Obligations (CLOs) are non-bank entities securitizing high-yield loans and trading these on secondary markets. They are decisive for the functioning of the leveraged loan market and therefore refinancing opportunities of firms. We assess how CLOs change their trading behavior when public attention to climate change rises. We find that CLOs increase exposure to high emission loans at lower prices. CLOs with experience in trading brown loans and younger CLOs with a stable liability structure drive the effects. We conclude that CLOs take on the role of arbitrageurs when public attention to climate change is pronounced.
Please use this url to cite or link to this publication:
https://lup.lub.lu.se/record/514ba12a-e0e7-4457-802a-2a4e19a5996f
- author
- Hackenberg, Kathrin ; Klaus, Viktoria ; Klingler, Sven and Sondershaus, Talina LU
- organization
- publishing date
- 2023-02-01
- type
- Working paper/Preprint
- publication status
- published
- subject
- keywords
- climate change, sustainable investing, Paris Agreement, private markets, leveraged loans, institutional investors, shadow banks, non-banks, CLOs, G11, G14, G23, Q51
- pages
- 61 pages
- publisher
- SSRN
- language
- English
- LU publication?
- yes
- id
- 514ba12a-e0e7-4457-802a-2a4e19a5996f
- alternative location
- https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4344497
- date added to LUP
- 2023-09-19 13:41:53
- date last changed
- 2024-02-21 13:44:45
@misc{514ba12a-e0e7-4457-802a-2a4e19a5996f, abstract = {{Collateralized Loan Obligations (CLOs) are non-bank entities securitizing high-yield loans and trading these on secondary markets. They are decisive for the functioning of the leveraged loan market and therefore refinancing opportunities of firms. We assess how CLOs change their trading behavior when public attention to climate change rises. We find that CLOs increase exposure to high emission loans at lower prices. CLOs with experience in trading brown loans and younger CLOs with a stable liability structure drive the effects. We conclude that CLOs take on the role of arbitrageurs when public attention to climate change is pronounced.}}, author = {{Hackenberg, Kathrin and Klaus, Viktoria and Klingler, Sven and Sondershaus, Talina}}, keywords = {{climate change; sustainable investing; Paris Agreement; private markets; leveraged loans; institutional investors; shadow banks; non-banks; CLOs; G11; G14; G23; Q51}}, language = {{eng}}, month = {{02}}, note = {{Preprint}}, publisher = {{SSRN}}, title = {{CLOs' Trading of Brown Loans when Climate Change Draws Attention}}, url = {{https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4344497}}, year = {{2023}}, }