Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/238182 
Year of Publication: 
2020
Series/Report no.: 
NBB Working Paper No. 395
Publisher: 
National Bank of Belgium, Brussels
Abstract: 
We empirically test the prediction of Pastor, Stambaugh, and Taylor 2020 that green firms can outperform brown firms when climate change concerns strengthen unexpectedly for S&P 500 companies over the period January 2010 - June 2018. To capture unexpected increases in climate change concerns, we construct a Media Climate Change Concern index using climate change-related news published by major U.S. newspapers. We find a negative relationship between the firms' exposure to the Media Climate Change Concerns index and the level of the firm's greenhouse gas emission per unit of revenue. This result implies that when concerns about climate change rise unexpectedly, green firms' stock price increases, while brown firms' stock price decreases. Further, using topic modeling, we analyze which type of climate change news drives this relationship. We identify five themes that have an effect on green vs. brown stock returns. Some of those themes can be related to change in investors' expectations about the future cash- ow of green vs. brown firms, while others cannot. This result implies that the relationship between concern and green vs. brown stock returns arises from both investors updating their expectations about the future cash- ows of green and brown firms and changes in investors' sustainability taste.
Subjects: 
Asset Pricing
Climate Change
Sustainable Investing
ESG
Greenhouse Gas Emission
Sentometrics
Textual Analysis
Document Type: 
Working Paper

Files in This Item:
File
Size
968.94 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.