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Climate reputation risk and abnormal returns in the stock markets: a focus on large emitters

Author

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  • Giovanni Guastella

    (Fondazione Eni Enrico Mattei, Milano – Dipartimento di Matematica e fisica “Niccolò Tartaglia”, Università Cattolica del Sacro Cuore, Brescia)

  • Matteo Mazzarano

    (Fondazione Eni Enrico Mattei, Milano – Dipartimento di Matematica e fisica “Niccolò Tartaglia”, Università Cattolica del Sacro Cuore, Brescia)

  • Stefano Pareglio

    (Fondazione Eni Enrico Mattei, Milano – Dipartimento di Matematica e fisica “Niccolò Tartaglia”, Università Cattolica del Sacro Cuore, Brescia)

  • Anastasios Xepapadeas

    (Department of International and European Economic Studies, Athens University of Economics and Business, Greece – Department of Economics, University of Bologna)

Abstract

Transition to a climate-neutral society is expected to generate disruptive changes and influence the investors and consumers’ perception. According to the Task Force on Climate-related Disclosures, firms that compose the polluting sectors might be vulnerable to reputation risk. In this work, we investigated the effect of climate-related announcements of listed companies on their equity performance. Focusing on the major historical greenhouse gas equivalents emitters, we studied the effect of companies’ climate-related social media activity on their daily abnormal returns in general and during climate-related events. Results suggest that climate-related announcements expose firms to abnormally negative returns. Sensitive external events and political rallies coincided with negative stock returns within investor’s expectations.

Suggested Citation

  • Giovanni Guastella & Matteo Mazzarano & Stefano Pareglio & Anastasios Xepapadeas, 2021. "Climate reputation risk and abnormal returns in the stock markets: a focus on large emitters," DISCE - Quaderni del Dipartimento di Politica Economica dipe0022, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
    • Handle: RePEc:ctc:serie5:dipe0022
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    More about this item

    Keywords

    Transition Risk; Reputation risk; Events Analysis; Text Analysis; Efficient Markets;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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