Abstract

This paper analyzes the market valuation of climate innovations through a detailed examination of patent data. We explore the relationship between Tobin’s Q —a measure of firm valuation— and the stock of patents across various climate technology categories. Our findings indicate that, generally, investors do not value climate innovations. However, our exploratory analysis reveals two notable exceptions. First, patents related to improving the efficiency of carbon-intensive technologies (carbon intensive climate innovation) show a positive correlation with firm valuation. Second, a select group of patents in noncarbon- intensive climate technologies, which contribute to both adaptation and mitigation efforts, are also positively valued. Our results suggest that a one standard deviation increase in the stock of patents relative to R&D expenses, measuring firms’ research efficiency in these climate innovation categories, is associated with an increase between 0.5 % and 1.5 % in Tobin’s Q.

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