Market-Based Green Firms

Konrad Adler, Oliver Rehbein, Matthias Reiner and Jing Zeng
Additional contact information
Konrad Adler: University of St. Gallen - School of Finance; Swiss Finance Institute
Oliver Rehbein: Vienna University of Economics and Business
Matthias Reiner: Vienna University of Economics and Business
Jing Zeng: University of Bonn; Centre for Economic Policy Research (CEPR)

No 25-104, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: This paper proposes a simple but effective tool to measure firms' exposure to climate risk: the market. We develop a model showing that abnormal stock returns around significant climate policy events measure a firm's exposure to climate risk. Building on this theoretical foundation, we create market-based greenness measures based on abnormal returns around UN climate conferences. Our measurement of climate risk covers around 36,000 international firms, a tenfold increase relative to existing measures. It is associated with lower present and future carbon emissions and provides explanatory power distinct from existing climate risk measures. Market-based green firms are more likely to file green patents, have lower stock-price volatility, and tend to be financially more robust. At the country level, market-based greenness is associated with lower emission intensity and a larger share of renewable energy.

Keywords: greenness; green firms; climate risk; climate change (search for similar items in EconPapers)
JEL-codes: G14 G32 G38 Q54 (search for similar items in EconPapers)
Pages: 91 pages
Date: 2025-02
New Economics Papers: this item is included in nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp25104

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