Transition versus physical climate risk pricing in European financial markets: a text-based approach

Bua, Giovanna; Kapp, Daniel; Ramella, Federico; Rognone, Lavinia

doi:10.1080/1351847x.2024.2355103

The European Journal of Finance

2024

DOI: 10.1080/1351847x.2024.2355103

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Transition versus physical climate risk pricing in European financial markets: a text-based approach

Giovanna Bua,

Daniel Kapp,

Federico Ramella

et al.

Abstract: This paper should not be reported as representing the views of the European Central Bank (ECB). The views expressed are those of the authors and do not necessarily reflect those of the ECB.

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Cited by 6 publications

References 72 publications

(53 reference statements)

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Commodity Futures Market Conditions and Climate Policy Risk: Evidence From Energy and Metals Markets

Dogah,

Wu,

Rognone

2024

Journal of Futures Markets

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This study investigates the impact of climate policy uncertainty (CPU) on energy and metal commodity futures markets by employing quantile regression, which accounts for various (bearish, normal, and bullish) markets. Our results reveal that the impact of CPU shocks is heterogeneous and market condition‐specific. Particularly, CPU exerts a significantly negative effect on all commodities, except natural gas, in a bearish market. Under a normal market, the impact of CPU on energy returns varies across commodities whereas for a bullish market, the CPU effect is mixed. The results also reveal natural gas to be a good hedge instrument for climate policy risk. We further conducted channel analysis using the theory of storage and hedging pressure hypothesis. The key finding reveals inventory level as the transmission channel of climate policy risk. Our findings have implications for the inventory management strategies of producers and suggest that regulators should consider market‐based policies in their decarbonization efforts.

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Commodity Futures Market Conditions and Climate Policy Risk: Evidence From Energy and Metals Markets

Dogah,

Wu,

Rognone

2024

Journal of Futures Markets

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Nonlinear effects of climate risks on climate-sensitive sectors

Zhu,

2024

Econ Change Restruct

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Climate risk, ESG ratings, and the flow-performance relationship in mutual funds

Ali,

Badshah,

Demirer

et al. 2024

Global Finance Journal

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Transition versus physical climate risk pricing in European financial markets: a text-based approach

Abstract: This paper should not be reported as representing the views of the European Central Bank (ECB). The views expressed are those of the authors and do not necessarily reflect those of the ECB.

Cited by 6 publications

References 72 publications

Commodity Futures Market Conditions and Climate Policy Risk: Evidence From Energy and Metals Markets

Commodity Futures Market Conditions and Climate Policy Risk: Evidence From Energy and Metals Markets

Nonlinear effects of climate risks on climate-sensitive sectors

Climate risk, ESG ratings, and the flow-performance relationship in mutual funds

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