Project »IF«

Investment Funds for low-carbon Infrastructure

Motivation - Aim – Partners – Progress – Work Packages – Publications  –  Contact


Private sector finance will have a key role for the transition to a climate-neutral economy. It can provide finance for innovative, low or zero emissions alternatives in energy generation or energy efficient infrastructure, while managing the associated financial risks. But its success will depend on the available financial instruments. The IF project explores existing and novel instruments, their attractiveness for different groups of investor, and their potential within national climate policy.


The IF project investigates financial instruments for low-emission infrastructure designed to mobilize new investors. Institutional investors are of particular interest, as they arguably favor the risk-return profile of infrastructure projects but have as of yet largely ignored green infrastructure. And small institutional as well as individual investors currently have very limited access to low-emission infrastructure investment.

The project draws on a broad methodology to identify investment vehicles that can mobilize investment by these investor groups, exploring the spectrum of existing finance instruments as well as developing new instruments. Central questions are what makes low-emission infrastructure attractive as an investment for institutional investors and households, and how much private infrastructure investment can contribute to climate change mitigation.

The IF project is funded by the German Federal Ministry of Education and Research (BMBF) from December 2018 to November 2021 and part of the BMBF Dialog on the Economics of Climate Change in the theme Climate protection & transformation and the crosscutting theme Financial markets, financial sector and climate finance.   


Potsdam Institute for Climate Impact Research

University of Kassel
– Institute of Economics

University of Kassel
– Institute of Management and Business Studies

FL Public Economics and Climate Finance

Dr. Kai Lessmann
Boyan Yanovski

Chair of Empirical Economic Research

Prof. Dr. Andreas Ziegler
Dr. Gunnar Gutsche
Daniel Engler

Chair of Corporate Finance

Prof. Dr. Christian Klein
Dr. Bernhard Zwergel
Tobias Bauckloh
Leonard Remme

Analysis of the potential of infrastructure funds for climate policy building on modelling expertise.
Analysis of individual and institutional investor preferences toward low-carbon infrastructure with surveys and stated choice experiments.
Empirical evaluation of existing investment barriers and risk-return profiles of low-carbon infrastructure investment opportunities.


Project Roadmap


Work packages

WP1: Evaluation of investment barriers and risk-return profiles of low-carbon infrastructure investments

WP1 refers to the first two guiding research questions of the project and wants to identify which investment barriers are addressed by existing financial instruments (e.g. green bonds) and hypothetical novel instruments (i.e. different designs of public infrastructure funds and citizen funds) as well as how these investment instruments change the risk-return profiles of low-carbon infrastructure. WP1 will be conducted at the University of Kassel.

WP2: Empirical analysis of investor preferences based on survey and stated choice data

Connected to preparatory work done in WP1, WP2 aims to identify the (perceived) relevance of various barriers to investments in low-carbon infrastructure among individuals in different EU member states, but also institutional investors, provides insights on the general acceptance of low-carbon infrastructure, and analyses investors' preferences for different investment instruments (e.g. public infrastructure funds or green bonds) and thus their potential to overcome existing investment barriers. It further targets to identify to what extent these preferences are affected by a range of influencing factors, which can be broadly divided into financial motives (e.g. risk aversion, return expectations, liquidity considerations, time preferences), other typical economic preferences (e.g. trust and reciprocity) and (non-financial) motives (e.g. home bias, i.e. the unwillingness to invest money abroad, altruism, environmental awareness, social norms, and socioeconomic- and demographic factors). Considering individual investors in different member states enables WP2 to investigate differences and similarities across countries in order to  derive country-specific recommendations for policy makers, but also financial market actors. Additionally, WP2 estimates parameters, e.g. measures for investors' risk aversion, which enter the simulation models conducted in WP3. To this end, WP2 comprises the construction of questionnaires, the realization of representative surveys among financial decision makers of households in five EU member states (Germany, Denmark, France, Poland, and Spain), but also among institutional investors, and the subsequent data analysis.

WP3: Potential of infrastructure funds for climate policy

WP3 confronts barriers to and promotion of low-carbon infrastructure investment for climate change mitigation following a bottom-up approach in a four step program. First, we develop risk profiles for typical low-carbon infrastructure projects. We analyze how climate policy affects risk but predominantly the risk information is a prerequisite for subsequent tasks. Second, we explore the potential role of low-carbon infrastructure for portfolio optimizing investors. Third, we integrate low-carbon infrastructure and portfolio optimizing investors in a climate policy model. WP3 will be conducted at PIK.

WP0: Coordination and dissemination

The project is managed by PIK.    


Work in progress and discussion papers

  • Cauthorn, Thomas and Klein, Christian and Remme, Leonard and Zwergel, Bernhard: Portfolio benefits of taxonomy orientated and renewable European electric utilities.
  • Engler, D., Gutsche, G., Ziegler, A. 2021, Is there a hypothetical gap in experiments on the willingness to pay for sustainable funds? OSF Registries
  • Engler, D., Gutsche, G., Zawojska, E. 2021, Trust in institutions and consequentiality perceptions in a stated preference survey? AEA RCT Registry
  • Engler, Daniel, Gunnar Gutsche und Paul Smeets (2021): Individual preferences for sustainable investments across Europe – A framed field experiment in five countries. Available at OSF:
  • Yanovski, Boyan and Lessmann, Kai: Financing the Fossil Fuel Phase-Out. Available at SSRN:
  • Edenhofer, Ottmar and Lessmann, Kai and Tahri, Ibrahim: Asset Pricing and the Carbon Beta of Externalities. CESifo Working Paper No. 9269, Available at SSRN:
  • Yanovski, Boyan and Lessmann, Kai and Tahri, Ibrahim: The Link between Short-Termism and Risk: Barriers to Investment in Long-Term Infrastructure Projects. Available at SSRN:
  • Edenhofer, O. and Klein, C. and Lessmann, K- and Wilkens, M. (2020): Wie Der ‘Green Deal’ Die Richtigen Anreize Setzen Kann: Ein Vorschlag Zur Ausgestaltung Eines Fonds Zur Staatlichen Finanzierung Nachhaltiger Unternehmen Und Realinvestitionen. Available at SSRN:


  • Edenhofer, O., C. Klein, K. Lessmann and M. Wilkens (2022): "Financing the transformation: a proposal for a credit scheme to finance the Paris Agreement" Climate Policy, DOI: 10.1080/14693062.2022.2075820. Accepted manuscript available from author's homepage.
  • Daniel Engler, Elke D. Groh, Gunnar Gutsche & Andreas Ziegler (2021) Acceptance of climate-oriented policy measures under the COVID-19 crisis: an empirical analysis for Germany, Climate Policy, 21:10, 1281-1297, DOI: 10.1080/14693062.2020.1864269

Prior research

The research agenda of the IF project builds on prior own research including the following exemplary publications. 

  • Gutsche, Gunnar and Bernhard Zwergel (2020), Information barriers and labeling schemes for socially responsible investments, Schmalenbach Business Review,  Schmalenbach Business Review 72, 111-157,

  • Gutsche, Gunnar and Andreas Ziegler (2019), Which private investors are willing to pay for sustainable investments? Empirical evidence from stated choice experiments, Journal of Banking and Finance 102, 193-214

  • Gutsche, Gunnar, Anja Köbrich León, and Andreas Ziegler (2019), On the relevance of contextual factors for socially responsible investments: An econometric analysis, Oxford Economic Papers 71 (3), 756-776

  • Klenert, D, Mattauch, L, Edenhofer, O, Lessmann, K. Infrastructure and Inequality: Insights from Incorporating Key Economic Facts about Household Heterogeneity. Macroeconomic Dynamics, 2018, 22(4), 864-895.

  • Bauckloh, T, Klein, C, Zwergel, B. Sustainable and conventional mutual funds: Do they really differ? Corporate Finance, 2017, 03-04:89-93.

    • von Wallis M, Klein C. Ethical requirement and financial interest: a literature review on socially responsible investing. Bus Res. Springer International Publishing, 2014, 8:61–98.


    Potsdam-Institut für Klimafolgenforschung (PIK)
    Kai Lessmann
    Postfach 60 12 03, 14412 Potsdam
    +49 331 2882563