Environment and Digitalization: The New Paradigms in the European Stock Markets

In a European context in which the objectives of climate neutrality and digitalization appear fundamental, the work analyzes the relationships between the price of the main stock market indices and the most representative variables such as carbon emissions, digitalization, use of renewable energy, research and development expenses, environmental taxes, and all economic and management activities aimed at reducing or eliminating any form of pollution. The analysis was developed through three different regressions involving the long period 1995–2020 and the short period 2017–2020. The results show how increasing carbon emissions and environmental taxes positively impact stock indices. The former is linked to an increase in production and, therefore, economic growth, and the latter encourages sustainability. Taxes on transport and energy in the long term generate higher costs, which damage profitability and negatively impact the performance of stock indices. Finally, in the short term, implementing environmental protection measures or the sustainable management of resources may lead to higher operating costs for the companies involved. These cost increases can negatively impact profit margins and reduce the value of companies. These results, therefore, show us how environmental sustainability has a significant impact on European stock markets; consequently, the relevant regulations and policies should also consider the economic and managerial impacts that companies implement to achieve their objectives of the Green Deal.