Climate change policies: Good news or bad news for firms in the European Union?

Abstract

This paper investigates whether the European Union policies to tackle climate change create or destroy value for shareholders over the years 2013–2018. Using the event study method, our results suggest that all the sectors were affected by at least one climate policy announcement and that negative effects were more common than positive effects, especially when the Paris Agreement came into force. Up until that point, the announcement of a new policy produced significant positive effects only on the most environmentally committed firms. Finally, data panel regressions reveal that the company's sector, more than its environmental commitment, played a central role in determining market reactions toward climate policies. Our paper contributes to the still limited debate on the relationship between environmental regulation and value for equity investors and opens up the debate on a topic yet to be explored: the mitigating role of the company's environmental commitment. Relevant implications for policy makers promoting a European sustainable economy are also discussed.

Climate change events and stock market returns

“…Because the PA was not a one-day event, it appears that the sectors analyzed here anticipated some changes in climate change policy since the CAR of the fossil fuel and transport sectors also decreased before the agreement announcement, corroborating the results of Pham et al (2019) for Germany and Diaz-Rainey et al (2021) for the US oil and gas companies. However, new information about the agreement reached further reduced asset values in the U.S.A. as was the case for the EU (Birindelli and Chiappini 2021).…”

“…We hypothesize that the stock market can efficiently price in new information that these events carry. We assume that the stock market reaction to this systematic risk depends on the industry, similarly to Pham et al (2019) and Birindelli and Chiappini (2021). However, we follow the definition of climate policy-relevant sectors provided by Battiston et al (2017) to study the response of sector-specific exchangetraded funds (ETFs) to the events relevant to the climate change discussion and climate policy.…”

“…Previous event studies on climate policies looked at the European companies' response to the Paris Agreement (Pham et al 2019;Birindelli and Chiappini 2021), and reaction of energy stocks from Germany (Betzer, Doumet, and Rinne 2013;Sen and von Schickfus 2020), the U.S.A. (Diaz-Rainey et al 2021), and in worldwide comparison (Ferstl, Utz, and Wimmer 2012;Mukanjari and Sterner 2018) to Fukushima and the American election. Thus, this work differs from the previous research by focusing on a sector-specific response of the US ETFs to a set of events that includes Climategate, which has not been considered before in the financial studies.…”

The Impact of COVID-19 Lockdowns on Sustainable Indexes

“…Thus, our results may support the growth of a sustainable market and a set of products-structured products, ETFs, ETNs, and funds-linked with such sustainable indexes, although some policy issues related to the ESG screening methodologies used by sustainable indexes exist. Indeed, the concerns on ESG screening [78][79][80] are still ongoing and surely justify the European actions aimed at fostering such processes. Establishing international working groups and supranational authorities with the power to investigate and regulate the ESG scoring of large providers of ESG data as well as of large asset managers appears useful, timely and highly needed to foster a trustworthy market of ESG investments.…”

Building Occupancy Behavior and Prediction Methods: A Critical Review and Challenging Locks

“…4. The EU Climate change adaptation strategy (2013) and the Paris Climate Agreement (2015) are legally trying to reduce global warming by global commitment [14], [15]. As buildings have huge part in global warming, researches on occupancy prediction and behavior analysis to reduce energy consumption are considerably increased.…”