Green Investments and Top Income Inequality *

This paper provides empirical evidence for a signicant positive association between green investments and top income inequality from a panel of 87 countries from 2004 to 2020. This relationship is strongest for countries with initially lower levels of income, financial development, and carbon emissions. We also find evidence that the effect on inequality persists for four years and thereafter abates. We argue that the positive association between green finance and inequality is at least partially driven by the mechanism of technological change. Using a moderated mediation design, we show that green patents are mediating the relationship between green finance and overall and top income inequality.