Copyright Page
© 2025 International Monetary Fund
WP/25/37
IMF Working Paper
Western Hemisphere Department
Climate News and Asset Valuations: Insights from Latin America
Prepared by Muhsin Ciftci and Christina Kolerus
Authorized for distribution by Daniel Leigh
February 2025
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
ABSTRACT: We study the impact of climate-related news on asset prices in eight Latin American countries. We use both newspapers and official announcements to construct daily, country-specific indices via textual analysis, reflecting media coverage of transition risks, climate opportunities, regulatory actions, and physical risks. Leveraging an unbalanced daily panel data set of 628 firms from 2000 to 2023, we find a significant and robust climate risk premium in Latin America, which is higher for “browner” firms and has increased in more recent years. Focusing on major climate policies announced in official gazettes after the legislative process has been completed, we show that the publication of the laws is associated with a protracted decline in the relative stock prices of high-emissions firms.
RECOMMENDED CITATION: Ciftci, M. and C. Kolerus (2025). Climate News and Asset Valuations: Insights from Latin America. IMF Working Paper No. 25/37
| JEL Classification Numbers: | C32, C53, E32, F44, H23, Q54 |
| Keywords: | Climate Change; Climate Risk Premium; Financial Asset Pricing; Textual Analysis |
| Author’s E-Mail Address: | m.ciftci.econ@gmail.com; ckolerus@imf.org |
| JEL Classification Numbers: | C32, C53, E32, F44, H23, Q54 |
| Keywords: | Climate Change; Climate Risk Premium; Financial Asset Pricing; Textual Analysis |
| Author’s E-Mail Address: | m.ciftci.econ@gmail.com; ckolerus@imf.org |
Title Page
WORKING PAPERS
Climate News and Asset Valuations: Insights from Latin America
Prepared by Muhsin Ciftci and Christina Kolerus
Climate News and Asset Valuations: Insights from Latin America∗
Muhsin Ciftci† Christina Kolerus‡
Goethe University Frankfurt IMF
5 February 2025
Abstract
We study the impact of climate-related news on asset prices in eight Latin American countries. We use both newspapers and official announcements to construct daily, country-specific indices via textual analysis, reflecting media coverage of transition risks, climate opportunities, regulatory actions, and physical risks. Leveraging an unbalanced daily panel data set of 628 firms from 2000 to 2023, we find a significant and robust climate risk premium in Latin America, which is higher for “browner” firms and has increased in more recent years. Focusing on major climate policies announced in official gazettes after the legislative process has been completed, we show that the publication of the laws is associated with a protracted decline in the relative stock prices of high-emissions firms. JEL Classifications: C32, C53, E32, F44, H23, Q54
Keywords: Climate Change, Climate Risk Premium, Financial Asset Pricing, Textual Analysis
Contents
1 Introduction
2 Data
2.1 Climate news
2.2 Firm-level data
2.3 Country-level and macro data
3 Construction of climate news indices
3.1 Climate news from media outlets
3.2 Climate policy news in official gazettes
4 Empirical specification and baseline estimates
4.1 Latin America’s climate risk premium
4.2 A lower climate risk premium for “green” firms
4.3 Industry level heterogeneity
4.4 Official news
5 An event study approach
6 Robustness
6.1 Investor awareness and coarse categorization
6.2 Forward-looking expected return proxies
7 Conclusion
A Appendix
B Acknowledgments
We would like to thank the seminar participants at the IMF for very useful discussions, Gabriel Moura Queiroz for excellent research assistance, and Daniel Leigh, Ilya Stepanov, Zamid Aligishiev, Christopher Evans, Sònia Muñoz and Sandra Baquié for valuable comments.
Corresponding author. Frankfurt am Main, Germany. Email: m.ciftci.econ@gmail.com
Washington, D.C., USA. Email: ckolerus@imf.org