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Stock Price Rewards to Climate Saints and Sinners: Evidence from the Trump Election

Author

Listed:
  • Ramelli, Stefano
  • Wagner, Alexander F
  • Zeckhauser, Richard
  • Ziegler, Alexandre

Abstract

Donald Trump's 2016 election and the subsequent nomination of Scott Pruitt, a climate skeptic and self-proclaimed opponent of the Environmental Protection Agency's "activist agenda", to lead the EPA drastically shifted expectations on US climate change policy. Firms' stock-price reactions to these events reveal whether their climate strategies affected their valuations. As widely reported, firms in industries with high carbon intensity benefited, at least briefly. It might be expected that companies with "responsible" strategies on climate change would have lost value. In fact, investors actually rewarded such firms. The analysis shows that this observed climate responsibility premium is due, at least in part, to the strategic behavior of long-horizon investors who look into the future to assess the valuation of corporations.

Suggested Citation

  • Ramelli, Stefano & Wagner, Alexander F & Zeckhauser, Richard & Ziegler, Alexandre, 2018. "Stock Price Rewards to Climate Saints and Sinners: Evidence from the Trump Election," CEPR Discussion Papers 13206, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:13206
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    References listed on IDEAS

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    More about this item

    Keywords

    climate change; CSR; election surprise; ESG; event study; Stock returns;

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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