A Tale of Commodities and Climate-driven Disasters

75 Pages Posted: 14 Jan 2025

Date Written: November 29, 2024

Abstract

This paper examines the impact of climate-driven disasters on commodity prices. Using extensive archival sources including census data and declassified CIA intelligence reports, I develop a global geospatial dataset to identify the locations of key commodity-producing sites at subnational level since the 1970s. By linking these regions to climate disaster events, I find that, over time, production has become increasingly concentrated in high-risk areas. Leveraging this dataset, I analyze how commodity futures respond to climate-driven shocks and uncover significant cross-sectional differences. Specifically, a long-only portfolio of vulnerable commodities yields a significant monthly alpha of 0.90%, whereas that of resilient commodities, albeit still significant, is negative at -0.43%, reflecting a premium paid for protection against climate shocks. Furthermore, I find that vulnerable commodities experience slower recoveries from past shocks.

Keywords: Commodities, Climate-driven disasters, Geospatial data

JEL Classification: C58, G13, Q54

Suggested Citation

Pellegrino, Filippo, A Tale of Commodities and Climate-driven Disasters (November 29, 2024). Available at SSRN: https://ssrn.com/abstract=5039185 or http://dx.doi.org/10.2139/ssrn.5039185

Filippo Pellegrino (Contact Author)

Imperial College London ( email )

South Kensington Campus
Exhibition Road
London, Greater London SW7 2AZ
United Kingdom

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