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CLOs' Trading of Brown Loans when Climate Change Draws Attention

Hackenberg, Kathrin ; Klaus, Viktoria ; Klingler, Sven and Sondershaus, Talina LU (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:
author
; ; and
organization
publishing date
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}},
}