Volume 16, Number 1, June 2026
| How Green Investment Funds Respond to Carbon Emission Policies in a Rising Interest Rate Environment
|
Fu-Ju Yang 1, Hsiu-Chuan Lee 2*, Fang-Tzu Tung 3, Tien-Tien Liao 4,and Yi-Hsien Wang 5
Abstract
In this ESG era, prioritizing compliance with carbon emission standards in global investments and commodity circulation is essential. Failure to do so could hinder financial investments and supply chains from operating within major markets that enforce these regulations. When carbon emission policies are adjusted in response to rising interest rates, relevant industries may face significant uncertainty. The associated costs are likely to be passed on to the green consumer market and may also affect green financial products, impacting financial market participants. Green investment funds focus on investing in environmental protection and sustainable development sectors, making their returns directly influenced by government policies. This study mainly explores the impact of the return volatility of green investment funds under the scenarios of interest rate hikes and carbon emission policy announcements from 2021 to 2023. Empirical research has found that most green investment funds support the central bank's interest rate hikes, which have a significant impact on the return volatility of green investment funds. Interest rate hikes typically affect the cost of capital, thereby influencing investors' investment decisions, which in turn has a noticeable impact on the volatility of green investment funds.
Keywords:Raised interest rates, Carbon emission, Green investment
1 Department of Banking and Finance, Chinese Culture University
* Corresponding author, (* E-mail: fuju@ulive.pccu.edu.tw)
2 Department of Finance, Ming Chun University
3 Department of Banking and Finance, Chinese Culture University
4 Department of International Business Administration, Chinese Culture University
5 Doctorate Program in Intelligent Banking and Finance, CTBC Business School