Investor Rewards to Climate Responsibility: Evidence from the 2016 Climate Policy Shock

60 Pages Posted: 27 Sep 2018 Last revised: 12 Aug 2019

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: July 5, 2019

Abstract

Donald Trump's election and his nomination of Scott Pruitt, a climate skeptic, to lead the Environmental Protection Agency drastically downshifted expectations on US climate-change policy. We study firms' stock-price reactions and institutional investors' portfolio adjustments after these events. As expected, carbon-intensive firms benefited. Should not companies with responsible strategies on climate change have lost value, since they were paying for actions that were now less urgent? In fact, investors actually rewarded such firms. The premium the firms received resulted, at least in part, from the move into climate-responsible stocks by long-horizon investors presumably expecting a post-Trump rebound to green policy.

Keywords: Climate finance, climate policy, CSR, election surprise, ESG, event study, institutional investors, stock returns

JEL Classification: G14, G38, G41

Suggested Citation

Ramelli, Stefano and Wagner, Alexander F. and Zeckhauser, Richard J. and Ziegler, Alexandre, Investor Rewards to Climate Responsibility: Evidence from the 2016 Climate Policy Shock (July 5, 2019). 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
Zürich, 8032
Switzerland
+41446342953 (Phone)

Alexander F. Wagner (Contact Author)

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

Plattenstrasse 14
Zürich, 8032
Switzerland
+41 44 634 3963 (Phone)

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Swiss Finance Institute ( email )

Switzerland

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

Richard J. Zeckhauser

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

79 John F. Kennedy Street
Cambridge, MA 02138
United States
617-495-1174 (Phone)
617-384-9340 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States
617-495-1174 (Phone)
617-496-3783 (Fax)

Alexandre Ziegler

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

Plattenstrasse 14
Zürich, 8032
Switzerland

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