Market-Based Green Firms

75 Pages Posted: 28 Feb 2025

See all articles by Konrad Adler

Konrad Adler

University of St. Gallen - School of Finance; Swiss Finance Institute

Oliver Rehbein

Vienna University of Economics and Business

Matthias Reiner

Vienna University of Economics and Business

Jing Zeng

University of Bonn; Centre for Economic Policy Research (CEPR)

Date Written: February 28, 2025

Abstract

This paper proposes a simple but effective tool to measure firms' exposure to climate risk: the market. We first develop a model showing that abnormal stock returns around significant climate policy events measure a firm's exposure to climate risk. On this basis, we create market-based firm greenness measures for around 36,000 international firms based on abnormal returns around UN climate conferences. The resulting measure creates intuitive rankings of sector-level climate-risk exposure and is correlated with, but distinct from existing measures. At the firm level, market-based greenness is associated with lower present and future carbon emissions. Green firms are more likely to file green patents, have lower stock-price volatility, and tend to be financially more robust. At the country level, market-based greenness is associated with lower emission intensity and a larger share of renewable energy.

Keywords: greenness, green firms, climate risk, climate change

JEL Classification: G14, G32, G38, Q54

Suggested Citation

Adler, Konrad and Rehbein, Oliver and Reiner, Matthias and Zeng, Jing, Market-Based Green Firms (February 28, 2025). Available at SSRN: https://ssrn.com/abstract=5160004 or http://dx.doi.org/10.2139/ssrn.5160004

Konrad Adler

University of St. Gallen - School of Finance ( email )

Unterer Graben 21
St. Gallen, 9000
Switzerland

Swiss Finance Institute ( email )

Oliver Rehbein (Contact Author)

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

Matthias Reiner

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

Jing Zeng

University of Bonn ( email )

Adenauerallee 24-26
Bonn, D-53012
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
66
Abstract Views
323
Rank
726,892
PlumX Metrics