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War and Policy: Investor Expectations on the Net-Zero Transition

Author

Listed:
  • Wagner, Alexander F.
  • Deng, Ming
  • Leippold, Markus
  • Wang, Qian

Abstract

This study employs novel text-based proxies to analyze corporate exposure to regulatory risks in the low-carbon transition. In response to the Russia-Ukraine war, stocks with higher transition risk outperformed, suggesting an expected slowdown in the transition. These effects were far more pronounced in the US than Europe, where renewable energy policy support was anticipated. The US Inflation Reduction Act (IRA) and the REPowerEU plan increased the value of firms with renewable energy opportunities, but the IRA also benefited higher transition risk firms. Overall, the findings highlight an international divergence in the energy transition pace.

Suggested Citation

  • Wagner, Alexander F. & Deng, Ming & Leippold, Markus & Wang, Qian, 2022. "War and Policy: Investor Expectations on the Net-Zero Transition," CEPR Discussion Papers 17207, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:17207
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    More about this item

    Keywords

    inflation; ESG; Stock returns; Energy; Resilience; Event studies; Climate transition risk; Russia-ukraine war;
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • G01 - Financial Economics - - General - - - Financial Crises
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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