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Climate change concerns and the performance of green versus brown stocks

David Ardia, Keven Bluteau (), Kris Boudt and Koen Inghelbrecht

Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium from Ghent University, Faculty of Economics and Business Administration

Abstract: We empirically test the prediction of Pastor, Stambaugh, and Taylor (2020) that green firms outperform brown firms when concerns about climate change increase unexpectedly, using data for S&P 500 companies from January 2010 to June 2018. To capture unexpected increases in climate change concerns, we construct a Media Climate Change Concerns index using news about climate change published by major U.S. newspapers. We find that when concerns about climate change increase unexpectedly, green firms’ stock prices increase, while brown firms’ decrease. Further, using topic modeling, we conclude that climate change concerns affect returns both through investors updating their expectations about firms’ future cash flows and through changes in investors’ preferences for sustainability

Keywords: Asset Pricing; Climate Change; Sustainable Investing; ESG; Greenhouse Gas Emissions; Sentometrics; Textual Analysis (search for similar items in EconPapers)
JEL-codes: G11 G18 Q54 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2021-03
New Economics Papers: this item is included in nep-ene, nep-env and nep-reg
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Persistent link: https://EconPapers.repec.org/RePEc:rug:rugwps:21/1011

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