Essay in Economics, Political Economy and Climate Transition

In this study, we investigate the impact of climate-related events on listed companies and their stock performance. Our focus is on the major historical greenhouse gas emitters of four different sectors (fossil fuel, transportation, automobile, and financial). We analyze the effect of climate-related events, such as natural disasters caused by human actions, climate global strikes and speeches by Greta Thunberg, on the daily abnormal returns of these companies. The results suggest that, firstly, climate-related events can result, on average, in cumulative abnormal negative returns for those companies in these sectors compared to the renewable energy sector, used as the benchmark for the green sector. Second, for some of these companies, reputation risk may be reduced by high environmental pillar scores that are not perfectly aligned with environmental performances (i.e. GHG emissions). We then assess the impact of climate sentiment on short-term stock market performance, as measured by abnormal returns, finding a positive correlation between the climate-related social media talks and cumulative abnormal returns. To conclude, external events, including climate-related rallies and speeches, are correlated with negative abnormal stock returns in line with investor expectations.