Climate change, risk factors and stock returns: A review of the literature

Alessio Venturini

International Review of Financial Analysis, 2022, vol. 79, issue C

Abstract: This article reviews how climate change could be considered an additional source of market risk. I discuss the types of data needed to analyse the climate risk drivers that shape the dynamics of the equity market. I present empirical evidence at both the macro and micro-level, analysing whether and to what extent the equity market prices climate change and related risks. Top-down and bottom-up approaches are compared to understand which climate risk is more likely to affect the cross-section of stock returns, both within and across sectors. Emphasis is also placed on investors’ beliefs about climate change risks, and the related asset pricing implications are analysed. I conclude by illustrating further directions for both empirical and theoretical research in the field of climate finance.

Keywords: Climate change; Physical risk; Transition risk; Asset pricing; ESG (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (58)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:79:y:2022:i:c:s1057521921002568

DOI: 10.1016/j.irfa.2021.101934

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