The Paris Agreement effect of consumer awareness and sustainable investing: Some international evidence

Ya-Kai Chang, William Ming Yan Cheung, Min-Hsi Chung and Haoyun Tan

Pacific-Basin Finance Journal, 2024, vol. 85, issue C

Abstract: This paper examines the consumer channel of sustainable investing, specifically during the surge in global environmental awareness triggered by the adoption of the Paris Agreement in 2015. Using the Paris Agreement as an exogenous shock to consumer awareness and a difference-in-difference framework, we investigate its impact on firms with negative environmental impacts. Our results show that “brown” firms, as identified by lower environmental scores, experience a significant post-Agreement decline in both sales performance and profitability relative to their matched counterparts. Our results hold after controlling for firm factors related to sales and profitability, and some fixed effects. Robustness tests further support these findings, demonstrating the influential role of heightened consumer awareness in shaping the declining demand for brown firms' products. This study contributes to the sustainable investment literature by highlighting the importance of the consumer channel and providing international evidence of its impact on firm financial performance.

Keywords: Consumer awareness; Sustainable investing; Paris agreement; Climate change; Corporate financial performance (search for similar items in EconPapers)
JEL-codes: G32 Q51 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:85:y:2024:i:c:s0927538x24001458

DOI: 10.1016/j.pacfin.2024.102394

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