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The Power of Words: Central Bank Green Communication and Performance of Energy Sectors

Author

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  • Karen Davtyan

    (Departament of Applied Economics, Universitat Autònoma de Barcelona, Spain)

  • Adel R. Kalozdi

    (Departament of Applied Economics, Universitat Autònoma de Barcelona, Spain)

Abstract

This paper investigates the effect of climate- and energy-related (green) communication by the European Central Bank (ECB) on the performance of renewable and fossil-based energy sectors. Using a sentence-embedding natural language processing method, we identify 247 ECB speeches from 2015 to 2024 that explicitly reference both climate and energy themes, categorize them, and compute a green score for each. The analysis reveals prominent topics of climate and financial risk, and monetary policy and economic conditions, along with consistently positive and trust-related emotional cues. We then use high-frequency identification to estimate the effect of ECB green speeches on the return differential between the green and the brown energy sectors. The results show that such ECB communication positively and significantly affects sectoral relative returns, highlighting the communicative role of the ECB in influencing the relative performance of green and brown energy sectors. The results remain robust across a series of sensitivity analyses. The effect does not change significantly with respect to the outbreak of the Russian–Ukrainian war or the ECB communication topics.

Suggested Citation

  • Karen Davtyan & Adel R. Kalozdi, 2025. "The Power of Words: Central Bank Green Communication and Performance of Energy Sectors," Working Papers wpdea2515, Department of Applied Economics at Universitat Autonoma of Barcelona.
    • Handle: RePEc:uab:wprdea:wpdea2515
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    References listed on IDEAS

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