Investors' delight? Climate risk in stock valuation during COVID-19 and beyond

  • We use the COVID-19 pandemic period in 2020 as an exogenous shock event to assess in how far climate risks measured by carbon exposure have entered and established themselves in the valuation of global stocks. In addition to descriptive analyses, we conduct cross-sectional panel regressions to assess the influence of carbon intensity levels on return and risk characteristics during and after the shock period. Furthermore, a difference-in-differences model setup allows us to infer whether these influences were significantly different when comparing pre-shock, shock, and post-shock periods. We find that carbon intensity affected returns significantly and negatively during a time of high uncertainty. In fact, high-emitting stocks suffered significantly more compared to the pre-crisis period. However, they could make up for their additional losses in the recovery period. In line with their high-risk exposure towards stranded assets and climate policy uncertainty, carbon-intensive stocksWe use the COVID-19 pandemic period in 2020 as an exogenous shock event to assess in how far climate risks measured by carbon exposure have entered and established themselves in the valuation of global stocks. In addition to descriptive analyses, we conduct cross-sectional panel regressions to assess the influence of carbon intensity levels on return and risk characteristics during and after the shock period. Furthermore, a difference-in-differences model setup allows us to infer whether these influences were significantly different when comparing pre-shock, shock, and post-shock periods. We find that carbon intensity affected returns significantly and negatively during a time of high uncertainty. In fact, high-emitting stocks suffered significantly more compared to the pre-crisis period. However, they could make up for their additional losses in the recovery period. In line with their high-risk exposure towards stranded assets and climate policy uncertainty, carbon-intensive stocks face higher risk levels in more stable economic times, thus justifying a carbon premium.show moreshow less

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Metadaten
Author:Andrea JacobORCiDGND, Martin NerlingerORCiDGND
URN:urn:nbn:de:bvb:384-opus4-910601
Frontdoor URLhttps://opus.bibliothek.uni-augsburg.de/opus4/91060
ISSN:2071-1050OPAC
Parent Title (English):Sustainability
Publisher:MDPI
Type:Article
Language:English
Date of first Publication:2021/11/04
Publishing Institution:Universität Augsburg
Release Date:2021/12/09
Tag:climate risk; COVID-19; investment decisions; equity returns; G01; G11; G12; Q54
Volume:13
Issue:21
First Page:12182
DOI:https://doi.org/10.3390/su132112182
Institutes:Wirtschaftswissenschaftliche Fakultät
Wirtschaftswissenschaftliche Fakultät / Institut für Betriebswirtschaftslehre
Wirtschaftswissenschaftliche Fakultät / Institut für Betriebswirtschaftslehre / Lehrstuhl für Finanz- und Bankwirtschaft
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Licence (German):CC-BY 4.0: Creative Commons: Namensnennung (mit Print on Demand)