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War and Policy: Investor Expectations on the Net-Zero Transition

Author

Listed:
  • Ming Deng

    (University of Zurich - Department of Banking and Finance; Swiss Finance Institute)

  • Markus Leippold

    (University of Zurich; Swiss Finance Institute)

  • Alexander F. Wagner

    (University of Zurich - Department of Banking and Finance; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); Swiss Finance Institute)

  • Qian Wang

    (University of Zurich - Department of Banking and Finance; Inovest Partners AG)

Abstract

This study employs novel text-based proxies to analyze corporate exposure to regulatory risks in the low-carbon transition. In response to the Russia-Ukraine war, stocks with higher transition risk outperformed, suggesting an expected slowdown in the transition. These effects were far more pronounced in the US than Europe, where renewable energy policy support was anticipated. The US Inflation Reduction Act (IRA) and the REPowerEU plan increased the value of firms with renewable energy opportunities, but the IRA also benefited higher transition risk firms. Overall, the findings highlight an international divergence in the energy transition pace.

Suggested Citation

  • Ming Deng & Markus Leippold & Alexander F. Wagner & Qian Wang, 2022. "War and Policy: Investor Expectations on the Net-Zero Transition," Swiss Finance Institute Research Paper Series 22-29, Swiss Finance Institute, revised May 2023.
    • Handle: RePEc:chf:rpseri:rp2229
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    File URL: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4080181
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    Citations

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    Cited by:

    1. Ferriani, Fabrizio & Gazzani, Andrea, 2023. "The impact of the war in Ukraine on energy prices: Consequences for firms’ financial performance," International Economics, Elsevier, vol. 174(C), pages 221-230.
    2. Ioannis Dokas & Georgios Oikonomou & Minas Panagiotidis & Eleftherios Spyromitros, 2023. "Macroeconomic and Uncertainty Shocks’ Effects on Energy Prices: A Comprehensive Literature Review," Energies, MDPI, vol. 16(3), pages 1-35, February.
    3. Basnet, Anup & Blomkvist, Magnus & Galariotis, Emilios, 2022. "The role of ESG in the decision to stay or leave the market of an invading country: The case of Russia," Economics Letters, Elsevier, vol. 216(C).
    4. Bougias, Alexandros & Episcopos, Athanasios & Leledakis, George N., 2022. "Valuation of European firms during the Russia–Ukraine war," Economics Letters, Elsevier, vol. 218(C).
    5. Lastauskas, Povilas & Proškutė, Aurelija & Žaldokas, Alminas, 2023. "How do firms adjust when trade stops?," Journal of Economic Behavior & Organization, Elsevier, vol. 216(C), pages 287-307.
    6. Nerlinger, Martin & Utz, Sebastian, 2022. "The impact of the Russia-Ukraine conflict on energy firms: A capital market perspective," Finance Research Letters, Elsevier, vol. 50(C).
    7. Umar, Muhammad & Riaz, Yasir & Yousaf, Imran, 2022. "Impact of Russian-Ukraine war on clean energy, conventional energy, and metal markets: Evidence from event study approach," Resources Policy, Elsevier, vol. 79(C).
    8. Anup Basnet & Emilios Galariotis & Magnus Blomkvist, 2022. "The role of ESG in the decision to stay or leave the market of an invading country: The case of Russia," Post-Print hal-03689077, HAL.

    More about this item

    Keywords

    Climate transition risk; energy; ESG; event study; inflation; Inflation Reduction Act; resilience; regulation; REPowerEU; Russia-Ukraine war; stock returns;
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G01 - Financial Economics - - General - - - Financial Crises
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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