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Climate Risks and Private Infrastructure Valuation

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  • Yuhan Zhang, Gianfranco Gianfrate

Abstract

This paper examines how climate-related news affects the cost of capital for private infrastructure investment across countries. We combine a novel dataset of global infrastructure transactions with country-level measures of climate sentiment constructed from GDELT news data, alongside indicators of climate policy stringency and physical risk. We find that climate-related information is systematically incorporated into asset valuations: more adverse climate news is associated with lower valuation multiples, consistent with higher required returns, while more favorable news increases valuations. In contrast, we find no significant effects on realized returns, suggesting that climate information primarily operates through ex-ante adjustments in discount rates rather than realized cash flows. The effects are stronger in countries with higher transition risk and weaker institutional environments. These findings highlight the role of information in shaping financing conditions and suggest that climate-related narratives can influence the allocation of capital during the energy transition by affecting the cost of infrastructure investment.

Suggested Citation

  • Yuhan Zhang, Gianfranco Gianfrate, 2026. "Climate Risks and Private Infrastructure Valuation," BAFFI CAREFIN Working Papers 26276, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    • Handle: RePEc:baf:cbafwp:cbafwp26276
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    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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