Do financial markets respond to green opportunities?

Kruse, Tobias, Mohnen, Myra and Sato, Misato ORCID: 0000-0002-9978-9595 (2024) Do financial markets respond to green opportunities? Journal of the Association of Environmental and Resource Economists, 11 (3). 549 - 576. ISSN 2333-5955

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Abstract

This study investigates whether financial markets respond to firms’ climate actions. We exploit the signing of the Paris Agreement, which required governments to commit to ambitious climate action, as a quasi-natural experiment. Using a proprietary green revenue database, we find that firms deriving a significant fraction of their revenues from green goods and services experience on average a 10% increase in cumulative abnormal returns following the agreement. The empirical evidence indicates that financial markets are responding to opportunities associated with new green markets, and strengthening climate policies can reallocate capital to support green private sector investment.

Item Type:	Article
Official URL:	https://www.journals.uchicago.edu/doi/10.1086/7273...
Additional Information:	© 2024 The Association of Environmental and Resource Economist
Divisions:	Grantham Research Institute
Subjects:	H Social Sciences > HG Finance
JEL classification:	D - Microeconomics > D2 - Production and Organizations > D20 - General G - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency; Event Studies G - Financial Economics > G1 - General Financial Markets > G18 - Government Policy and Regulation Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q5 - Environmental Economics > Q50 - General Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q5 - Environmental Economics > Q58 - Government Policy
Date Deposited:	07 Feb 2024 15:24
Last Modified:	12 Dec 2024 04:03
URI:	http://eprints.lse.ac.uk/id/eprint/121969

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