Disclosed corporate responses to climate change and stock performance: An international empirical analysis

Andreas Ziegler, Timo Busch and Volker H. Hoffmann

Energy Economics, 2011, vol. 33, issue 6, 1283-1294

Abstract: This paper examines the relationship between disclosed corporate responses to climate change and stock performance on the European and US stock markets. Methodologically, we consider investor expectations and compare risk-adjusted returns of stock portfolios comprising corporations that differ in this indicator for environmental performance. In this respect, we apply the flexible Carhart four-factor model in addition to the restricted one-factor model based on the Capital Asset Pricing Model (CAPM). The main result of our portfolio analysis is that a trading strategy which consists of buying stocks of corporations disclosing responses to climate change and selling stocks of corporations with no disclosures has become more worthwhile over time in Europe. Furthermore, it can be shown that the relationship between disclosed corporate responses to climate change and stock performance has been positive for energy firms in the USA. One reason for these results could be the underlying stringency of institutional pressure with respect to global warming.

Keywords: Climate change; Climate policy; Corporate environmental performance; Financial performance; Portfolio analysis; Asset pricing models (search for similar items in EconPapers)
JEL-codes: G11 G12 M14 Q48 Q54 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (48)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:33:y:2011:i:6:p:1283-1294

DOI: 10.1016/j.eneco.2011.03.007

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