Stock Price Rewards to Climate Saints and Sinners: Evidence from the Trump Election
59 Pages Posted: 27 Sep 2018 Last revised: 12 Nov 2018
Date Written: November 12, 2018
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: Suggested Citation