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Real-time transition risk

Matthias Apel, André Betzer and Bernd Scherer

Finance Research Letters, 2023, vol. 53, issue C

Abstract: We develop a point-in-time index to approximate changes in transition risk from climate-related news events. By explicitly considering news to signal an increase or a decrease in the external pressure towards a shift to a lower-carbon economy, we overcome the assumption that “no news is good news on climate” inherent in previous research. We evaluate the return sensitivity of publicly available climate portfolios that apply different approaches to measure a firm's environmental performance based on investors’ objectives. Our results show that short-term transition risk tends to affect returns of stock portfolios based on firms’ business activity but not emissions.

Keywords: Transition risk; Climate finance; News sentiment; Natural language processing; Asset Pricing (search for similar items in EconPapers)
JEL-codes: C8 G12 Q54 (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:53:y:2023:i:c:s1544612322007760

DOI: 10.1016/j.frl.2022.103600

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