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Investor Rewards to Climate Responsibility: Evidence from the 2016 Climate Policy Shock

Author

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

Abstract

Donald Trump's election and his nomination of Scott Pruitt, a climate skeptic, to lead the Environmental Protection Agency drastically downshifted expectations on US climate-change policy. We study firms' stock-price reactions and institutional investors' portfolio adjustments after these events. As expected, carbon-intensive firms benefited. Should not companies with responsible strategies on climate change have lost value, since they were paying for actions that were now less urgent? In fact, investors actually rewarded such firms. The premium the firms received resulted, at least in part, from the move into climate-responsible stocks by long-horizon investors presumably expecting a post-Trump rebound to green policy.

Suggested Citation

  • Stefano Ramelli & Alexander F. Wagner & Richard J. Zeckhauser & Alexandre Ziegler, 2018. "Investor Rewards to Climate Responsibility: Evidence from the 2016 Climate Policy Shock," NBER Working Papers 25310, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:25310
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    Cited by:

    1. Stefano Carattini & Suphi Sen, 2019. "Carbon Taxes and Stranded Assets: Evidence from Washington State," CESifo Working Paper Series 7785, CESifo Group Munich.

    More about this item

    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
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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