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Market-Based Green Firms

Author

Listed:
  • Konrad Adler

    (University of St. Gallen - School of Finance; Swiss Finance Institute)

  • Oliver Rehbein

    (Vienna University of Economics and Business)

  • Matthias Reiner

    (Vienna University of Economics and Business)

  • Jing Zeng

    (University of Bonn; Centre for Economic Policy Research (CEPR))

Abstract

This paper proposes a simple but effective tool to measure firms' exposure to climate risk: the market. We develop a model showing that abnormal stock returns around significant climate policy events measure a firm's exposure to climate risk. Building on this theoretical foundation, we create market-based greenness measures based on abnormal returns around UN climate conferences. Our measurement of climate risk covers around 36,000 international firms, a tenfold increase relative to existing measures. It is associated with lower present and future carbon emissions and provides explanatory power distinct from existing climate risk measures. Market-based green firms are more likely to file green patents, have lower stock-price volatility, and tend to be financially more robust. At the country level, market-based greenness is associated with lower emission intensity and a larger share of renewable energy.

Suggested Citation

  • Konrad Adler & Oliver Rehbein & Matthias Reiner & Jing Zeng, 2025. "Market-Based Green Firms," Swiss Finance Institute Research Paper Series 25-104, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp25104
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    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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