Short Selling Polluters

Using aggregated facility-level toxic release data, we estimate the relation of pollution and short interest in the US between 1987 and 2017. Our findings suggest that short interest is significantly higher in polluting firms’ stocks, and that this relation is not an artifact of economic cycles. The results are concentrated among industrial firms and highly visible S&P 500 firms and are especially amplified at times when attention to pollution is intensive. We find evidence that this relation is due to short sellers’ anticipation of green investors’ divestments and of potential negative outcomes polluters face