Green risk in Europe

Nuno Cassola, Claudio Morana and Elisa Ossola
Additional contact information
Nuno Cassola: CEMAPRE, University of Lisbon, Portugal; Center for European Studies, University of Milano-Bicocca, Italy
Elisa Ossola: Center for European Studies, University of Milano-Bicocca, Italy; Rimini Centre for Economic Analysis

Working Paper series from Rimini Centre for Economic Analysis

Abstract: Climate change poses serious economic, financial, and social challenges to humanity, and green transition policies are now actively implemented in many industrialized countries. Whether financial markets price climate risks is critical to ensuring that the necessary funding flows into environmentally sound projects and that stranded assets risk is adequately managed. In this paper, we assess climate risks for the European stock market. We show that measures of returns spreads of green vs. brown investment might reflect climate risks and assets' exposition to systematic macro-financial risk factors. These latter factors should be filtered out to measure climate risks accurately. We show that climate risks are priced in the European stock market by focusing on aggregate, industry, and company-level data. We propose a market-based green rating procedure to evaluate non-transparent and non-disclosing companies for which ESG information is unavailable. We illustrate its implementation using a sample of over 800 non-transparent firms.

Keywords: Climate risk; environmental disclosure; macro-finance interface; asset pricing models; European Union (search for similar items in EconPapers)
JEL-codes: G01 G11 G12 Q54 (search for similar items in EconPapers)
Date: 2023-09, Revised 2024-06
New Economics Papers: this item is included in nep-eec, nep-ene, nep-env, nep-fmk and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://rcea.org/RePEc/pdf/wp23-14.pdf

Related works:
Working Paper: Green risk in Europe (2023)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rim:rimwps:23-14

Access Statistics for this paper

More papers in Working Paper series from Rimini Centre for Economic Analysis Contact information at EDIRC.
Bibliographic data for series maintained by Marco Savioli ().