Stock Price Rewards to Climate Saints and Sinners: Evidence from the Trump Election

59 Pages Posted: 27 Sep 2018 Last revised: 12 Nov 2018

See all articles by Stefano Ramelli

Stefano Ramelli

University of Zurich - Department of Banking and Finance

Alexander F. Wagner

University of Zurich - Department of Banking and Finance; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); Swiss Finance Institute

Richard J. Zeckhauser

Harvard University - Harvard Kennedy School (HKS); National Bureau of Economic Research (NBER)

Alexandre Ziegler

University of Zurich - Department of Banking and Finance

Multiple version iconThere are 3 versions of this paper

Date Written: November 12, 2018

Abstract

Donald Trump's 2016 election and the subsequent nomination of Scott Pruitt, a climate skeptic, to lead the Environmental Protection Agency drastically downshifted expectations on US climate change policy. Firms' stock-price reactions to these events reveal whether their climate strategies affected their valuations. As widely reported, firms in industries with high carbon intensity benefited, at least briefly. It might be expected that companies with "responsible" strategies on climate change would also have lost value, since they were paying for actions that seemed less urgent. In fact, investors actually rewarded such firms. The analysis shows that this observed climate responsibility premium results, at least in part, from the strategic behavior of long-horizon investors who looked into the future to assess the valuation of corporations.

Keywords: Climate change, CSR, election surprise, ESG, event study, stock returns

JEL Classification: G14, G38, G41

Suggested Citation

Ramelli, Stefano and Wagner, Alexander F. and Zeckhauser, Richard J. and Ziegler, Alexandre, Stock Price Rewards to Climate Saints and Sinners: Evidence from the Trump Election (November 12, 2018). Swiss Finance Institute Research Paper No. 18-63. Available at SSRN: https://ssrn.com/abstract=3254526 or http://dx.doi.org/10.2139/ssrn.3254526

Stefano Ramelli

University of Zurich - Department of Banking and Finance ( email )

Plattenstrasse 14
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Switzerland
+41446342953 (Phone)

Alexander F. Wagner (Contact Author)

University of Zurich - Department of Banking and Finance ( email )

Plattenstrasse 14
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Switzerland
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Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

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Swiss Finance Institute ( email )

Switzerland

HOME PAGE: http://www.alex-wagner.com

Richard J. Zeckhauser

Harvard University - Harvard Kennedy School (HKS) ( email )

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National Bureau of Economic Research (NBER) ( email )

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617-496-3783 (Fax)

Alexandre Ziegler

University of Zurich - Department of Banking and Finance ( email )

Plattenstrasse 14
Zürich, 8032
Switzerland

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