Market Reaction to Extreme Weather Events in the Electricity Sector

27 Pages Posted: 27 Oct 2023

See all articles by roberto bianchini

roberto bianchini

Polytechnic University of Milan - Department of Management, Economics and Industrial Engineering; Bocconi University - BAFFI Center on International Markets, Money, and Regulation

Vincenzo Butticè

POLITECNICO DI MILANO

Date Written: September 28, 2023

Abstract

We investigate the market reaction to extreme weather events, more prevalent over time, due to climate change. We focus on the European electricity companies, which have a diversified and geographically distributed portfolio of power plants, potentially exposed to various extreme weather events. We show that, when an extreme weather event affects a power plant, investors respond negatively. Moreover, market response becomes less negative for companies with higher share of women in the board, and higher ESG scores. The results demonstrate that the market incorporates information on extreme weather events and provide guidance on the company characteristics that mitigate the reaction.

Keywords: Climate Change, Extreme Weather Events, Abnormal Return, Asset Pricing, Event Study

JEL Classification: G32, G14, Q54

Suggested Citation

bianchini, roberto and BUTTICE, VINCENZO, Market Reaction to Extreme Weather Events in the Electricity Sector (September 28, 2023). Available at SSRN: https://ssrn.com/abstract=4586694 or http://dx.doi.org/10.2139/ssrn.4586694

Roberto Bianchini (Contact Author)

Polytechnic University of Milan - Department of Management, Economics and Industrial Engineering ( email )

Via Lambruschini 4C - building 26/A
Milano, 20156
Italy

Bocconi University - BAFFI Center on International Markets, Money, and Regulation ( email )

Milano, 20136
Italy

VINCENZO BUTTICE

POLITECNICO DI MILANO

Piazza Leonardo da Vinci
Milan, Milano 20100
Italy

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