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Explosive financing? Bank share price reactions to carbon bomb exposure

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  • Ceresa, Tim
  • Wallmeier, Martin

Abstract

On 31 October 2023, a collaboration of international media houses and French non-profit organizations published a report on bank financing of fossil fuel extraction projects representing more than 1 gigaton of CO2 emissions (“carbon bombs”). In this paper, we examine the value relevance of this information. We find that the market reaction is not explained by the incremental information about carbon bomb financing, but it was primarily influenced by the banks’ ESG scores: the lower the pre-release ESG score, the more negative the market reaction, suggesting that a strong environmental reputation mitigates the negative reaction to the carbon bomb disclosure.

Suggested Citation

  • Ceresa, Tim & Wallmeier, Martin, 2026. "Explosive financing? Bank share price reactions to carbon bomb exposure," Finance Research Letters, Elsevier, vol. 105(C).
    • Handle: RePEc:eee:finlet:v:105:y:2026:i:c:s1544612326007567
    DOI: 10.1016/j.frl.2026.110228
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    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

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