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Climate change exposure risk, reserves and stock returns of oil and gas companies

Author

Listed:
  • Diana Castro Herrera

    (UR CONFLUENCE : Sciences et Humanités (EA 1598) - UCLy - UCLy (Lyon Catholic University), ESDES - ESDES, Lyon Business School - UCLy - UCLy - UCLy (Lyon Catholic University))

  • Juncal Cunado

    (UNAV - Universidad de Navarra [Pamplona])

  • Juan Equiza-Goñi

    (UNAV - Universidad de Navarra [Pamplona])

  • Fernando Perez de Gracia

    (Economics - Universidad de Navarra, UNAV - Universidad de Navarra [Pamplona])

Abstract

This paper examines the joint effects of total proved reserves and climate change exposure on the stock returns of oil and gas companies with a particular focus on their interaction, using firm-level data from 2002 to 2022. Our findings reveal that climate change exposure has a significant positive effect on stock returns, suggesting the presence of a climate risk premium. We also find that the interaction between total proved reserves and exposure to climate regulatory shocks has a significant negative impact on stock returns, indicating that these reserves may be viewed as stranded assets. Finally, we detect that these effects are more pronounced after the Paris Agreement, which can be attributed to heightened levels of climate policy uncertainty following 2016.

Suggested Citation

  • Diana Castro Herrera & Juncal Cunado & Juan Equiza-Goñi & Fernando Perez de Gracia, 2025. "Climate change exposure risk, reserves and stock returns of oil and gas companies," Post-Print hal-05493979, HAL.
    • Handle: RePEc:hal:journl:hal-05493979
    DOI: 10.1016/j.jcomm.2025.100524
    as

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