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

59 Pages Posted: 3 Dec 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 2018

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.

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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 (November 2018). NBER Working Paper No. w25310. Available at SSRN: https://ssrn.com/abstract=3294878

Stefano Ramelli (Contact Author)

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

Plattenstrasse 14
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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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European Corporate Governance Institute (ECGI) ( 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 )

Plattenstrasse 14
Zürich, 8032
Switzerland

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