Stock Prices and the Russia-Ukraine War: Sanctions, Energy and ESG

53 Pages Posted: 27 May 2022 Last revised: 23 Jun 2022

See all articles by Ming Deng

Ming Deng

University of Zurich - Department Finance; Swiss Finance Institute

Markus Leippold

University of Zurich; Swiss Finance Institute

Alexander F. Wagner

University of Zurich - Department of Finance; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); Swiss Finance Institute

Qian Wang

University of Zurich - Department Finance; Inovest Partners AG

Multiple version iconThere are 2 versions of this paper

Date Written: April 2022

Abstract

In the build-up to and especially in the weeks after the Russian invasion of Ukraine, stocks more exposed to the regulatory risks of the transition to a low-carbon economy performed better, suggesting that investors expect a slow-down of that transition. Moreover, analysts increased their earnings estimates for these stocks. The stock price effects for transition risk were particularly strong in the US. In Europe, the effects for transition risk were less pronounced or even opposite. Stocks with opportunities in the low-carbon transition benefited, arguably because market participants expect stronger policy responses supporting renewable energy sources in the face of the pronounced dependence of Europe on Russian oil and gas. In sum, investors thus expect the speed of transition to a low-carbon economy to diverge between the US and Europe. The analysis controls for a range of different Environmental, Social, and Governance (ESG) measures (for which we obtain mixed results). Companies that more frequently refer to inflation in their conference calls with analysts performed worse. Internationally oriented firms did poorly, and investors were particularly concerned regarding companies' exposure to China. Overall, the results offer a preview of the challenging economic impact of the Russia-Ukraine war.

Keywords: Climate transition risk, Energy, ESG, Event studies, inflation, resilience, Russia-Ukraine war, Stock returns

JEL Classification: E3, G01, G14, Q54

Suggested Citation

Deng, Ming and Leippold, Markus and Wagner, Alexander F. and Wang, Qian, Stock Prices and the Russia-Ukraine War: Sanctions, Energy and ESG (April 2022). CEPR Discussion Paper No. DP17207, Available at SSRN: https://ssrn.com/abstract=4121382

Ming Deng (Contact Author)

University of Zurich - Department Finance ( email )

Plattenstrasse 32
Zurich, Zurich 8032
Switzerland

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

Markus Leippold

University of Zurich ( email )

Rämistrasse 71
Zürich, CH-8006
Switzerland

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

Alexander F. Wagner

University of Zurich - Department of Finance ( email )

Plattenstr 32
Zurich, 8032
Switzerland

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Swiss Finance Institute ( email )

Switzerland

HOME PAGE: http://www.alex-wagner.com

Qian Wang

University of Zurich - Department Finance ( email )

Schönberggasse 1
Zürich, 8001
Switzerland

Inovest Partners AG ( email )

Grabenstrasse 25
Baar, 6340
Switzerland

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