We build a model of a financial market where a large number of firms determine their emission strategies under climate transition risk in the presence of both green-minded and neutral investors. The firms maximize a criterion depending on their financial performance (determined by the equilibrium share price), and their environmental performance. The interaction between the firms takes place through the stochastic discount factor, determined in equilibrium by the investors' preferences. We formalize the problem in the setting of mean-field games and prove the existence and uniqueness of a Nash equilibrium for firms. We then present a convergent numerical algorithm for computing this equilibrium and illustrate the impact of climate transition risk and the presence of green-minded investors on the market decarbonization dynamics and share prices in a variety of settings.  

Scientific Committee