Corporate investment is essential to Europe’s transition toward climate neutrality. However, projects with long payback periods depend on predictable policy. A study published in Energy and Climate Management on September 30, 2026, examines how political uncertainty can impede green investment and which firms are most vulnerable.
Researchers from Renmin University of China, the University of Amsterdam and Ludwig-Maximilians University Munich analyzed 2,358 firm-year observations across 20 European countries from 2016 to 2021.
They used newspaper-based Economic Policy Uncertainty indices at European and national levels. Nine green-related keywords in annual reports, adjusted for report length, provided a proxy for firms’ disclosed orientation toward green investment. This indicator does not measure monetary expenditure.
Fixed-effects models, supplementary instrumental-variable estimates and checks using the World Uncertainty Index supported a negative relationship between uncertainty and the green investment proxy.
The paper highlights national policy predictability because governments implement climate commitments through subsidies, permits and regulation. As the authors write in the paper, “climate neutrality requires not only ambitious goals but also stability in fulfilling them.”
Uncertainty was also associated with tighter financial constraints, while more constrained firms showed stronger negative responses. Political connections provided a partial buffer, potentially through policy information and resources, but can carry agency costs and reputational risks.
European-level uncertainty was significantly associated with lower green investment indicators among EU and UK firms. The authors recommend predictable national implementation, targeted financing and wider access to policy information.
Future research could extend the disclosure measure to additional environmental dimensions, compare industries and countries, and identify policy designs that unintentionally increase uncertainty. The broader goal is to preserve corporate decarbonization through policies that remain credible during political turbulence.
Author biography
Lei Zhang is the corresponding author of this study at the School of Ecology and Environment, Renmin University of China.
D OI Link:
https://doi.org/10.26599/ECM.2026.9400039
Energy and Climate Management
Political uncertainty and corporate green investment: Evidence from European firms
30-Sep-2026