Over with carbon? Investors' reaction to the Paris Agreement and the US withdrawal

Lucia Alessi, Stefano Battiston () and Virmantas Kvedaras ()
Additional contact information
Stefano Battiston: University Ca' Foscari of Venice, http://www.unive.it/dip.economia
Virmantas Kvedaras: European Commission, https://ec.europa.eu/jrc/en

No 2021-12, JRC Working Papers in Economics and Finance from Joint Research Centre, European Commission

Abstract: How financial investors may react to policy events related to sustainability and climate change mitigation in particular, is a key question with implications for sustainable finance and financial stability. We address this question by carrying out a multi-period difference-in-difference approach on a confidential database of securities holdings of the European Central Bank, and we provide evidence of several effects related to the Paris Agreement. In aggregate, investors reduced their exposure to carbon-intensive assets in response to the agreement, and the trend reverted after the US withdrawal announcement. However, the reaction varies across categories and geographies of the securities holders, their ownership size, and the emissions of owned firms. In particular, transition risk has been taken up by less regulated financial institutions and the BRIC countries. Our results highlight that the redirection of global financial flows towards climate action requires clear and unanimous signals from the global community of policy makers.

Keywords: high-carbon firms; finance; Paris Agreement; stock holdings; US withdrawal (search for similar items in EconPapers)
JEL-codes: G11 G2 Q51 Q58 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2021-12
New Economics Papers: this item is included in nep-ene and nep-env
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Published by the European Commission, 2021

Downloads: (external link)
https://joint-research-centre.ec.europa.eu/publica ... and-us-withdrawal_en
Our link check indicates that this URL is bad, the error code is: 404 Not Found

Related works:
Journal Article: Over with carbon? Investors’ reaction to the Paris Agreement and the US withdrawal (2024)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:jrs:wpaper:202112

Access Statistics for this paper

More papers in JRC Working Papers in Economics and Finance from Joint Research Centre, European Commission Contact information at EDIRC.
Bibliographic data for series maintained by Peter Benczur ().