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The Paris Agreement effect of consumer awareness and sustainable investing: Some international evidence

Author

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  • Chang, Ya-Kai
  • Cheung, William Ming Yan
  • Chung, Min-Hsi
  • Tan, Haoyun

Abstract

This paper examines the consumer channel of sustainable investing, specifically during the surge in global environmental awareness triggered by the adoption of the Paris Agreement in 2015. Using the Paris Agreement as an exogenous shock to consumer awareness and a difference-in-difference framework, we investigate its impact on firms with negative environmental impacts. Our results show that “brown” firms, as identified by lower environmental scores, experience a significant post-Agreement decline in both sales performance and profitability relative to their matched counterparts. Our results hold after controlling for firm factors related to sales and profitability, and some fixed effects. Robustness tests further support these findings, demonstrating the influential role of heightened consumer awareness in shaping the declining demand for brown firms' products. This study contributes to the sustainable investment literature by highlighting the importance of the consumer channel and providing international evidence of its impact on firm financial performance.

Suggested Citation

  • Chang, Ya-Kai & Cheung, William Ming Yan & Chung, Min-Hsi & Tan, Haoyun, 2024. "The Paris Agreement effect of consumer awareness and sustainable investing: Some international evidence," Pacific-Basin Finance Journal, Elsevier, vol. 85(C).
    • Handle: RePEc:eee:pacfin:v:85:y:2024:i:c:s0927538x24001458
    DOI: 10.1016/j.pacfin.2024.102394
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    2. Yue, Xiaotong & Kong, Xiaoran & Zhao, Qiuyun & Ho, Kung-Cheng, 2024. "Impact of climate change risks on equity capital: Evidence-based on Chinese markets," Pacific-Basin Finance Journal, Elsevier, vol. 88(C).
    3. Wanidwaranan, Phasin & Wongkantarakorn, Jutamas & Padungsaksawasdi, Chaiyuth, 2025. "Climate policy uncertainty and trading behavior: Evidence from aggregate herd behavior," Energy Economics, Elsevier, vol. 149(C).

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    Keywords

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    JEL classification:

    • 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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