Climate change news sensitivity and expected stock returns: Evidence from China

Hengzhen Lu and Xinran Wang

Finance Research Letters, 2025, vol. 81, issue C

Abstract: Investors are increasingly looking to diversify their exposure to climate-related risks as climate change becomes a major concern. In the Chinese A-share market, we use the climate change news index to calculate stock covariance. Empirical results show that stocks with a positive climate news beta yield significantly higher excess returns, indicating advantages in ESG performance and predictive power for companies’ future fundamentals. Institutional investors are increasingly interested in these companies due to their exceptional ability to hedge climate risks. Our work provides important insights into green practices and sustainable investment by highlighting the relationship between investor behavior and climate risk management.

Keywords: Climate change risk; ESG; Stock; Institutional investors (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:81:y:2025:i:c:s1544612325007561

DOI: 10.1016/j.frl.2025.107497

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