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The effect of climate risks on the interactions between financial markets and energy companies

Author

Listed:
  • Arthur A. Benthem

    (University of Pennsylvania)

  • Edmund Crooks

    (Wood Mackenzie)

  • Stefano Giglio

    (Yale School of Management)

  • Eugenie Schwob

    (BlackRock)

  • Johannes Stroebel

    (NYU Stern School of Business)

Abstract

In recent years, the investment community has become increasingly aware of the investment risks from both the physical effects of climate change and the regulatory responses to facilitate the transition to a net-zero economy. The potential impact of climate transition risks is especially large for fossil energy companies, given their central role in producing carbon emissions. Here we discuss how concerns about climate risks influence the way investors allocate their capital and exercise their oversight of firms, and how this investor response affects companies in the energy sector. We then explore how different energy firms have responded to climate-related pressures from their investors and other stakeholders. We conclude by highlighting promising areas of research for understanding how climate risks affect the interaction between financial markets and the energy sector.

Suggested Citation

  • Arthur A. Benthem & Edmund Crooks & Stefano Giglio & Eugenie Schwob & Johannes Stroebel, 2022. "The effect of climate risks on the interactions between financial markets and energy companies," Nature Energy, Nature, vol. 7(8), pages 690-697, August.
    • Handle: RePEc:nat:natene:v:7:y:2022:i:8:d:10.1038_s41560-022-01070-1
    DOI: 10.1038/s41560-022-01070-1
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    Cited by:

    1. Bonato, Matteo & Cepni, Oguzhan & Gupta, Rangan & Pierdzioch, Christian, 2023. "Climate risks and state-level stock market realized volatility," Journal of Financial Markets, Elsevier, vol. 66(C).
    2. Simona Malovana & Dominika Ehrenbergerova & Zuzana Gric, 2023. "What Do Economists Think About the Green Transition? Exploring the Impact of Environmental Awareness," Working Papers 2023/6, Czech National Bank.
    3. Guo, Kun & Liu, Fengqi & Sun, Xiaolei & Zhang, Dayong & Ji, Qiang, 2023. "Predicting natural gas futures’ volatility using climate risks," Finance Research Letters, Elsevier, vol. 55(PA).
    4. Kejin Wu & Sayar Karmakar & Rangan Gupta & Christian Pierdzioch, 2023. "Climate Risks and Stock Market Volatility Over a Century in an Emerging Market Economy: The Case of South Africa," Working Papers 202326, University of Pretoria, Department of Economics.
    5. Hao Dong & Tao Li, 2023. "Climate Economics and Finance: A Literature Review," Climate Economics and Finance, Anser Press, vol. 1(1), pages 29-45, November.

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