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

60 Pages Posted: 2 Oct 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: September 2018

Abstract

Donald Trump's 2016 election and the subsequent nomination of Scott Pruitt, a climate skeptic and self-proclaimed opponent of the Environmental Protection Agency's "activist agenda", to lead the EPA drastically shifted 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 have lost value. In fact, investors actually rewarded such firms. The analysis shows that this observed climate responsibility premium is due, at least in part, to the strategic behavior of long-horizon investors who look into the future to assess the valuation of corporations.

Keywords: climate change, CSR, election surprise, ESG, event study, Stock returns

JEL Classification: G14, G38

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 (September 2018). CEPR Discussion Paper No. DP13206. Available at SSRN: https://ssrn.com/abstract=3259368

Stefano Ramelli (Contact Author)

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

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Alexander F. Wagner

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

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Centre for Economic Policy Research (CEPR) ( email )

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Swiss Finance Institute ( email )

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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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Alexandre Ziegler

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

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Zürich, 8032
Switzerland

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