Investor Rewards to Climate Responsibility: Stock-Price Responses to the Opposite Shocks of the 2016 and 2020 U.S. Elections
Review of Corporate Finance Studies, forthcoming
76 Pages Posted: 27 Sep 2018 Last revised: 18 Jun 2021
Date Written: May 5, 2021
Donald Trump's 2016 election and his nomination of climate skeptic Scott Pruitt to head the Environmental Protection Agency drastically downshifted expectations on U.S. policy toward climate change. Joseph Biden's 2020 election shifted them dramatically upward. We study firms' stock-price movements in reaction to these changes. As expected, the 2016 election boosted carbon-intensive firms. Surprisingly, firms with climate-responsible strategies also gained, especially those firms held by long-run investors. Such investors appear to have bet on a "boomerang" in climate policy. Harbingers of a boomerang appeared during Trump's term. The 2020 election marked its arrival.
Keywords: Climate finance, climate policy, CSR, election surprise, ESG, event study, institutional investors, policy boomerang, stock returns
JEL Classification: G14, G38, G41
Suggested Citation: Suggested Citation