Just “blah blah blah”? Stock market expectations and reactions to COP26

Giuliana Birindelli, Aline Miazza, Viktoriia Paimanova and Vera Palea

International Review of Financial Analysis, 2023, vol. 88, issue C

Abstract: Applying an event study methodology, this research examines whether and how the stock market incorporated the key outcomes and statements from the COP26 summit into share prices. Our study is based on a sample of 7587 firms from four economic areas (EU, USA, China and India) belonging to the most carbon-intensive sectors. The empirical evidence shows that stock market reaction depends on how country authorities respond to commitments to accelerate and scale the transition to a greener economy, confirming that the stock market reacts negatively to stringent climate policies and positively to less stringent regulations. At the same time, in sectors emitting the most pollution, investors tend to reward companies with the best/worst environmental performance according to the type of climate policies adopted, more or less strict. Since finance is expected to play a critical role in the transition to a low-carbon economy, our results have relevant policy implications by highlighting that only clearly-defined, long-term and credible climate-related policies can lead equity investors to adequately consider environmental issues.

Keywords: Stock market; Climate change; Event study; COP26; Green economy (search for similar items in EconPapers)
JEL-codes: G14 G28 Q58 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:88:y:2023:i:c:s1057521923002156

DOI: 10.1016/j.irfa.2023.102699

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