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Business and Economics > Investments: Stocks

You are looking at 1 - 2 of 2 items for :

  • Type: Journal Issue x
  • Environmental policy x
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Cover IMF Working Papers
Carbon Policy and Stock Returns: Signals from Financial Markets
Martina Hengge
,
Ugo Panizza
, and
Richard Varghese
Understanding the impact of climate mitigation policies is key to designing effective carbon pricing tools. We use institutional features of the EU Emissions Trading System (ETS) and high-frequency data on more than 2,000 publicly listed European firms over 2011-21 to study the impact of carbon policies on stock returns. After extracting the surprise component of regulatory actions, we show that events resulting in higher carbon prices lead to negative abnormal returns which increase with a firm's carbon intensity. This negative relationship is even stronger for firms in sectors which do not participate in the EU ETS suggesting that investors price in transition risk stemming from the shift towards a low-carbon economy. We conclude that policies which increase carbon prices are effective in raising the cost of capital for emission-intensive firms.
Keywords:
Carbon Emissions; Carbon Prices: Climate Change; Transition Risk; Stock Returns; carbon Policy surprise; investors price; carbon intensity; climate mitigation policy; EU ETS; Greenhouse gas emissions; Stocks; Asset prices; Climate change; Europe; Global; Emissions trading; stock return; carbon policy; EU Emissions Trading System; Climate policy
Cover IMF Working Papers
Climate Disaster Risks – Empirics and a Multi-Phase Dynamic Model
Stefan Mittnik
,
Willi Semmler
, and
Alexander Haider
Recent research in financial economics has shown that rare large disasters have the potential to disrupt financial sectors via the destruction of capital stocks and jumps in risk premia. These disruptions often entail negative feedback e?ects on the macroecon-omy. Research on disaster risks has also actively been pursued in the macroeconomic models of climate change. Our paper uses insights from the former work to study disaster risks in the macroeconomics of climate change and to spell out policy needs. Empirically the link between carbon dioxide emission and the frequency of climate re-lated disaster is investigated using cross-sectional and panel data. The modeling part then uses a multi-phase dynamic macro model to explore this causal nexus and the e?ects of rare large disasters resulting in capital losses and rising risk premia. Our proposed multi-phase dynamic model, incorporating climate-related disaster shocks and their aftermath as one phase, is suitable for studying mitigation and adaptation policies.
Keywords:
WP; monetary policy; capital stock; low income; risk pooling; climate economics; disaster risk; macro feedbacks; multi-phase macro model; monetary and financial policies; environmental economics; bond financing; credit policy; climate finance policy; bond issuing; climate bond; Bonds; Greenhouse gas emissions; Climate change; Climate policy; Natural disasters; Central Asia; Sub-Saharan Africa; East Asia; North Africa; Middle East