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Climate Change Concerns and the Performance of Green vs. Brown Stocks

Author

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  • David Ardia

    (Groupe d’Études et de Recherche en Analyse des Décisions (GERAD) & Department of Decision Sciences, École des Hautes Études Commerciales (HEC) Montréal, Montréal, Québec H3T 2A7, Canada)

  • Keven Bluteau

    (Department of Finance, Université de Sherbrooke, Sherbrooke, Québec J1K 2R1, Canada)

  • Kris Boudt

    (Solvay Business School, Vrije Universiteit Brussel, 1050 Brussels, Belgium; Department of Economics, Ghent University, 9000 Ghent, Belgium; School of Business and Economics, Vrije Universiteit Amsterdam, 1081 Amsterdam, The Netherlands)

  • Koen Inghelbrecht

    (Department of Economics, Ghent University, 9000 Ghent, Belgium)

Abstract

We empirically test the prediction of Pástor et al. (2021) that green firms outperform brown firms when concerns about climate change increase unexpectedly, using data for S&P 500 companies from January 2010 to June 2018. To capture unexpected increases in climate change concerns, we construct a daily Media Climate Change Concerns index using news about climate change published by major U.S. newspapers and newswires. We find that on days with an unexpected increase in climate change concerns, the green firms’ stock prices tend to increase, whereas brown firms’ prices decrease. Furthermore, using topic modeling, we conclude that this effect holds for concerns about both transition and physical climate change risk. Finally, we decompose returns into cash flow and discount rate news components and find that an unexpected increase in climate change concerns is associated with an increase (decrease) in the discount rate of brown (green) firms.

Suggested Citation

  • David Ardia & Keven Bluteau & Kris Boudt & Koen Inghelbrecht, 2023. "Climate Change Concerns and the Performance of Green vs. Brown Stocks," Management Science, INFORMS, vol. 69(12), pages 7607-7632, December.
    • Handle: RePEc:inm:ormnsc:v:69:y:2023:i:12:p:7607-7632
    DOI: 10.1287/mnsc.2022.4636
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    Citations

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    Cited by:

    1. Lai, Fujun & Cheng, Xianli & Li, An & Xiong, Deping & Li, Yunzhong, 2025. "Does flood risk affect the implied cost of equity capital?," Finance Research Letters, Elsevier, vol. 71(C).
    2. Fabrizio Ferriani & Andrea Gazzani & Filippo Natoli, 2025. "The macroeconomic effects of a greener technology mix," Temi di discussione (Economic working papers) 1482, Bank of Italy, Economic Research and International Relations Area.
    3. El Ouadghiri, Imane & Kaabia, Olfa & Peillex, Jonathan & Platania, Federico & Toscano Hernandez, Celina, 2025. "Attention to biodiversity and stock returns," International Review of Financial Analysis, Elsevier, vol. 97(C).
    4. Chen, Wang & Chen, Zhu & Luo, Qin, 2025. "Predicting volatility in China's clean energy sector: Advantages of the carbon transition risk," Finance Research Letters, Elsevier, vol. 72(C).
    5. Campiglio, Emanuele & De Angelis, Luca & Neri, Paolo & Scalisi, Ginevra, 2025. "From climate chat to climate shock: non‐linear impacts of transition risk in energy CDS markets," LSE Research Online Documents on Economics 127807, London School of Economics and Political Science, LSE Library.
    6. Meyer, Julia, 2024. "Do sustainably managed pension savings foster sustainable investments? Evidence from a field experiment," Journal of Behavioral and Experimental Finance, Elsevier, vol. 44(C).
    7. Mubeen Abdur Rehman & Saeed Ahmad Sabir & Muhammad Zahid Javed & Haider Mahmood, 2024. "The Connectedness Knowledge from Investors’ Sentiments, Financial Crises, and Trade Policy: An Economic Perspective," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(4), pages 20038-20062, December.
    8. Jiale He, 2025. "The impact of energy transition policies on urban green innovation: evidence from the new energy demonstration cities in China," Economic Change and Restructuring, Springer, vol. 58(3), pages 1-24, June.
    9. Li, Wanli & Luo, Dan & Cheng, Teng-Yuan, 2025. "Strategy choices in strategic risk-taking: Does climate risk matter?," International Review of Financial Analysis, Elsevier, vol. 97(C).
    10. Mario Schuster & Julian Krüger & Rainer Lueg, 2025. "Physical climate risk: Stock price reactions to the historically most extreme European and United States heat waves since 1979," PLOS ONE, Public Library of Science, vol. 20(1), pages 1-21, January.
    11. Zhang, Yaojie & Zhao, Xinyi & Zhang, Zhikai, 2025. "Financial regulatory policy uncertainty: An informative predictor for financial industry stock returns," The North American Journal of Economics and Finance, Elsevier, vol. 75(PB).
    12. Allahdadi, Mohammad R. & Fretheim, Torun & Vindedal, Kjetil, 2024. "Value of climate change news: A textual analysis," Global Finance Journal, Elsevier, vol. 63(C).
    13. Vu, Thanh Nam, 2025. "ESG performance and sustainability concerns exposure," Finance Research Letters, Elsevier, vol. 71(C).
    14. Wong, Jin Boon & Zhang, Qin, 2025. "The impact of political risks on carbon emissions," Energy Economics, Elsevier, vol. 141(C).
    15. Li, Chuandong & Sun, Qingyu & Ma, Xiaowei, 2024. "Promotion or inhibition? Understanding the impact of public environmental concerns on energy transition in China," Energy, Elsevier, vol. 313(C).
    16. Emanuele Campiglio & Luca De Angelis & Paolo Neri & Ginevra Scalisi, 2025. "From Climate Chat to Climate Shock: Non‐Linear Impacts of Transition Risk in Energy CDS Markets," Environmetrics, John Wiley & Sons, Ltd., vol. 36(3), April.

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