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Xintong Li

Research & Publication

Green Innovation Under Pressure

Job Market Paper    |    Joint with Anindo Sarkar

  • Abstract: As the impacts of climate change intensify, firms must overcome the technical challenges of emission reduction while coping with damage from frequent disasters. This paper provides novel evidence on how firms adjust the pace and direction of their innovation in response to costly physical disasters. Leveraging granular data on the joint spatial distribution of climate hazards and economic activity across the U.S., we do not find firms exposed to acute physical risks cut their R&D expenditure after disaster shocks. Instead, our patent analysis reveals a subsequent shift in these firms’ innovation efforts toward green technologies. To examine the underlying mechanisms, we extend the directed technical change framework by incorporating regulatory incentives and firms’ learning about future risks. Our findings demonstrate that post-disaster recovery, when the advantage of “dirty” vintages weakens, presents a unique window of opportunity for policies to accelerate the low-carbon transition while enhancing climate resilience.

  • Links:   draft

 

Sustainable Investing in General Equilibrium

Joint with Giacomo Rondina

  • Abstract: We investigate the conditions under which sustainable investing—wherein financial investors like (resp. dislike) holding assets that they believe have a positive (resp. negative) environmental/societal impact—alters the allocation of capital between clean and dirty firms in a dynamic general equilibrium framework. We show that investors with preferences for sustainable investing can generate both a composition and a scale impact on output. Yet the magnitude, direction, and timing of such effects crucially depend on the size of sustainable investors in terms of their wealth in the stock market, their investment horizon, and the distribution of firms across salient sustainability metrics. While our framework predicts the eventual impact of sustainable investing on capital allocation in favor of clean firms, it may take a long time before any real effect materializes.

  • Links:   draft     slides

 

Tracing the Impact of Sustainable Investing

Joint with Hanyi Wang

  • Abstract: This paper empirically investigates the impact of sustainable investing on firms’ financial performance and real outcomes. Albeit promising in theory, it is not evident how the pressure for sustainability exerted by value-aligned investors in secondary markets becomes an allocative force across firms. Focusing on the prevalent portfolio tilting strategy in practice, we delineate the transmission mechanism from investor preference, intermediated by funds, to underlying firms. Leveraging a 2016 natural experiment for identification, we find that firms with greater exposure to low-sustainability fund ownership experience acute downward pressure on their valuation and equity financing. However, no significant impact is observed on firm debt financing, consistent with our observation that the transmission of investors’ pressure for sustainability falls short of generating substantial real impacts on firms’ investment decisions. To meaningfully facilitate any environmental or social changes, evidence from this early episode in the recent ESG movement underscores the critical mass and coordination among sustainable investors.

  • Links:   draft     slides

 

Monetary Policy, Price of Risk, and Growth

Joint with Anindo Sarkar    |    Richard A. Libby Award

  • Links:   Anindo’s JMP

 

Greening the Global Portfolio: Institutional Investment Shift in Developing Countries

Joint with Hanyi Wang    |    work in progress

  • Abstract: We first document the environmental bias of institutional investors’ holdings in developing countries, where global funds disproportionally own more “dirty” equities than holding the local market. We hypothesize that the observed attenuation of such bias over the past decades can be attributed to two main channels: (i) investor pressure funds to reallocation capital from dirty to clean firms, and (ii) the shifting comparative advantage in th destination countries. We aim to test these two channels that contributed to the overall greening of global institutional portfolios in the 2010s.

 

Pre-Doctoral Publications

► Li, Xintong, Xinran Wang, Jiang Zhang, and Lingfei Wu. “Allometric scaling, size distribution and pattern formation of natural cities.” Palgrave Communications 1, no. 1 (2015): 1-11.

  • Keywords:   economies of scale, fractal geometry, Zipf’s Law, nighttime light
  • Links:   publisher (open access)

   

► Zhang, Jiang, Xintong Li, Xinran Wang, Wen-Xu Wang, and Lingfei Wu. “Scaling behaviours in the growth of networked systems and their geometric origins.” Scientific Reports 5, no. 1 (2015): 9767.

   

► Li, Xintong, Chao Wang, and Yougui Wang. “Self-Organization of Decentralized Markets with Network Externality.” Artificial Economics and Self Organization: Agent-Based Approaches to Economics and Social Systems (2014): 81-94.

  • Keywords:  trading network, price dispersion
  • Links:   publisher