The topic of this research looks at how society can steer financing towards cleantech technologies. The objective is to empirically test whether uncertainty about future environmental and climate regulations is negatively associated with investments in cleantech. The project investigates the role of a stable and predictable policy framework and evaluates the role of new financing tools for generating cleantech financing .
The project uses a novel approach to quantify environmental policy uncertainty, namely a text analysis of newspaper articles using machine-learning algorithms. The research team was recently invited to present their results at the National Bureau of Economic Research (NBER) conference at the Massachusetts Institute of Technology (MIT) in Boston. Overall, the project is part of a Swiss National Research Program (NRP73), which aims to provide practical solutions for developing the cleantech sector in Switzerland in partnerships with business organizations to policy organisations from a national and international level. Investors are particularly interested in our index as it can provide a quantifiable measure of policy risk.
The research team applied the text-mining algorithm on articles in 10 US newspapers over the last 40 years and found that our index captures the history of U.S. environmental regulations quite well, giving us confidence about the algorithm’s performance. They identified spikes around major domestic policies, such as the enactment of the Clean Air Act in 1990 or Obama’s Green New Deal in 2009, as well as during important international climate policy events. At this stage, we are still refining the algorithm for the policy uncertainty part. At this stage, they are still refining the algorithm for the policy uncertainty part.
Research team: Professor Joëlle Noailly (Graduate Institute), Professor Gaétan de Rassenfosse (EPFL), Laura Nowzohour (PhD candidate, Graduate Institute), Matthias van den Heuvel (PhD candidate, EPFL)
Check out the next issue of the Graduate Institute’s review Globe for the full interview!