Do financial markets respond to green opportunities?

Tobias Kruse, Myra Mohnen and Misato Sato

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: This study investigates whether financial markets respond to firms’ climate actions. We exploit the signing of the Paris Agreement, which required governments to commit to ambitious climate action, as a quasi-natural experiment. Using a proprietary green revenue database, we find that firms deriving a significant fraction of their revenues from green goods and services experience on average a 10% increase in cumulative abnormal returns following the agreement. The empirical evidence indicates that financial markets are responding to opportunities associated with new green markets, and strengthening climate policies can reallocate capital to support green private sector investment.

Keywords: green revenues; Paris Agreement; event study; corporate financial performance; green finance; H2020-MSCA-RISE project GEMCLIME-2020 (GA number 681228; Future Research Leaders (ES/N016971/1); Centre for Climate Change Economics and Policy (CCCEP) (ES/R009708/1); and PRINZ (ES/W010356/1 (search for similar items in EconPapers)
JEL-codes: D20 G14 G18 Q50 Q58 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2024-05-01
New Economics Papers: this item is included in nep-ene, nep-env, nep-fdg and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in Journal of the Association of Environmental and Resource Economists, 1, May, 2024, 11(3), pp. 549 - 576. ISSN: 2333-5955

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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:121969

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