Do ESG Stocks Exhibit Abnormal Reactions to Environmental Events? Evidence from the 29th United Nations Climate Change Conference

This study examines the short-term financial market response to the 29th United Nations Climate Change Conference (COP29). Using an event study methodology and controlling for systematic risk factors with the Fama-French three-factor model, the research assesses whether stocks with different ESG profiles exhibit abnormal returns around the summit. The results indicate a lack of statistically significant abnormal returns across both high- and low-ESG stocks. However, a divergence in performance is observed, with ESG-aligned assets slightly underperforming compared to their low-ESG counterparts during the event window. This underperformance may reflect increasing investor skepticism toward climate conferences that yield few binding commitments. These findings suggest that markets may be becoming more selective in responding to climate policy events, reacting less to symbolic pledges without enforceable regulatory frameworks. The study contributes to the literature on ESG asset pricing by shedding light on the short-term effects of environmental policy events. It also highlights the evolving sensitivity of ESG returns to market context, political credibility, and the perceived materiality of policy outcomes.