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Measuring Local Climate Change Attention: Does it Affect Investors and Firms?

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  • Kostovetsky, Leonard
  • Peng, Lin
  • Rauh, Christopher
  • Yönaç, Muhammed

Abstract

What drives people’s attitudes towards climate change and does it matter for economic outcomes? We address these questions by constructing a novel measure of local climate change attention using a comprehensive news dataset extracted from over 5,000 US newspapers from 2000-2022. We document an increasing trend in climate attention and growing polarization in climate-related sentiment across the US. Local climate attention, while comoves with national trends, exhibits significant regional variation. It correlates with local education levels, Democratic party affiliation, and extreme weather events, but not by local greenhouse gas emissions or toxic releases. Exploiting exogenous variation, we find that higher local climate attention is associated with increased individual investment in ESG-focused ETFs and improved environmental performance of local firms. These findings suggest local climate attention significantly influences investment decisions and corporate environmental policies.

Suggested Citation

  • Kostovetsky, Leonard & Peng, Lin & Rauh, Christopher & Yönaç, Muhammed, 2024. "Measuring Local Climate Change Attention: Does it Affect Investors and Firms?," CEPR Discussion Papers 19453, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:19453
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    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other
    • G39 - Financial Economics - - Corporate Finance and Governance - - - Other
    • G50 - Financial Economics - - Household Finance - - - General
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

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