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Climate Risk and American Depositary Receipts

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  • Qi Zhang

    (BSB - Burgundy School of Business (BSB) - ESC Dijon-Bourgogne, CEREN - Centre de Recherche sur les Entreprises - BSB - Burgundy School of Business (BSB) - ESC Dijon-Bourgogne)

  • Huijing Li
  • Chengbo Fu

Abstract

This research explores the relation between climate change exposure and excess returns of American Depositary Receipts (ADRs). The findings indicate a robust positive association between climate change exposure and excess returns for ADRs, suggesting that investors demand a risk premium for ADRs with higher climate-related risks. In contrast, this positive relationship is not observed for domestic U.S. stocks, where climate risk exposure does not significantly influence realized excess returns. The analysis delves into distinct dimensions of climate risk, demonstrating that the observed positive risk premium for ADRs is primarily driven by firms' exposure to climate-related opportunities. These results highlight the growing significance of climate risk in global markets and underscore the necessity of incorporating climate-related factors into investment decision-making processes.

Suggested Citation

  • Qi Zhang & Huijing Li & Chengbo Fu, 2025. "Climate Risk and American Depositary Receipts," Post-Print hal-05797905, HAL.
    • Handle: RePEc:hal:journl:hal-05797905
    DOI: 10.1016/j.frl.2025.108144
    as

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