Climate Risks and Private Infrastructure Valuation

Gianfranco Gianfrate Yuhan Zhang

No 26276, BAFFI CAREFIN Working Papers from BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy

Abstract: This paper examines how climate-related news affects the cost of capital for private infrastructure investment across countries. We combine a novel dataset of global infrastructure transactions with country-level measures of climate sentiment constructed from GDELT news data, alongside indicators of climate policy stringency and physical risk. We find that climate-related information is systematically incorporated into asset valuations: more adverse climate news is associated with lower valuation multiples, consistent with higher required returns, while more favorable news increases valuations. In contrast, we find no significant effects on realized returns, suggesting that climate information primarily operates through ex-ante adjustments in discount rates rather than realized cash flows. The effects are stronger in countries with higher transition risk and weaker institutional environments. These findings highlight the role of information in shaping financing conditions and suggest that climate-related narratives can influence the allocation of capital during the energy transition by affecting the cost of infrastructure investment.

Keywords: Climate risk; Cost of capital; Capital allocation; Climate sentiment; Infrastructure investment; Information frictions; Asset pricing (search for similar items in EconPapers)
JEL-codes: D81 G12 G31 Q54 Q56 (search for similar items in EconPapers)
Pages: 29
Date: 2026
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