Carbon Risk Premium and Worries about Climate Change

34 Pages Posted: 18 Oct 2021 Last revised: 12 Sep 2022

See all articles by Caterina Santi

Caterina Santi

University of Liège - HEC Liège

Angelo Moretti

Manchester Metropolitan University - Faculty of Science and Engineering

Date Written: October 14, 2021

Abstract

This paper sheds light on the impact of public attitudes towards climate change on the pricing of emission (carbon-intensive) and clean (low-emission) stocks. We develop a regional indicator of worries about climate change using data from the European Social Survey Round 8. We classify European regions as little worried, worried and very worried. We confirm previous evidence that emission stocks tend to have higher returns than clean stocks. However, when we focus on stocks quoted in exchange markets located in regions with low level of worries about climate change, we do not find evidence of a carbon risk premium. Conversely, the emission premium in worried regions is significant for medium-high quantiles of the return distribution.

Keywords: Public Attitudes, Climate Change, Climate Finance, Asset Pricing, Europe.

JEL Classification: C21, C83, G10, G12, Q54.

Suggested Citation

Santi, Caterina and Moretti, Angelo, Carbon Risk Premium and Worries about Climate Change (October 14, 2021). Available at SSRN: https://ssrn.com/abstract=3942738 or http://dx.doi.org/10.2139/ssrn.3942738

Caterina Santi (Contact Author)

University of Liège - HEC Liège ( email )

Rue Louvrex 14
Liège, 4000
Belgium

HOME PAGE: http://www.caterinasanti.com

Angelo Moretti

Manchester Metropolitan University - Faculty of Science and Engineering ( email )

United Kingdom

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