Stock Market Reactions to International Climate Negotiations

31 Pages Posted: 13 Nov 2020

See all articles by Franziska Schuetze

Franziska Schuetze

DIW Berlin; Global Climate Forum

Darko Aleksovski

Jozef Stefan Institute

Igor Mozetic

Jozef Stefan Institute

Date Written: October 24, 2020

Abstract

Several studies have shown that investors take environmental regulation into account in their investment decisions. We investigate if international climate negotiations are an effective signal to decarbonize the economy. For that purpose, we analyze short-term market reactions to the outcomes of international climate negotiations, through an event study. We compare the stock price effects on the largest "green“ companies with the largest "brown“ companies globally. We find that international climate negotiations have a signaling effect on global financial markets. Before 2013, climate negotiations mainly had effects on "green“ companies. Only starting in 2013, but especially in 2015 (Paris Agreement), we can find negative effects on "brown“ companies. This indicates that the focus has shifted to the risks for brown companies. Although the Paris Agreement was considered a political milestone, it was less effective as an investment signal. A possible explanation is the mismatch between international targets and national policies.

Keywords: Event Study, Climate Policy, Responsible Investment, Climate Negotiations, Paris Agreement

JEL Classification: G14

Suggested Citation

Schuetze, Franziska and Aleksovski, Darko and Mozetic, Igor, Stock Market Reactions to International Climate Negotiations (October 24, 2020). Available at SSRN: https://ssrn.com/abstract=3718277 or http://dx.doi.org/10.2139/ssrn.3718277

Franziska Schuetze (Contact Author)

DIW Berlin ( email )

Mohrenstraße 58
Berlin, 10117
Germany

Global Climate Forum ( email )

Darko Aleksovski

Jozef Stefan Institute ( email )

Jamova 39
Ljubljana, 1000

Igor Mozetic

Jozef Stefan Institute ( email )

Jamova 39
Ljubljana, 1000
Slovenia

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