Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/339516 
Year of Publication: 
2025
Series/Report no.: 
Working Paper No. 992
Publisher: 
Queen Mary University of London, School of Economics and Finance, London
Abstract: 
We document that climate-triggered institutional portfolio rebalancing affects S&P 500 firms' cost of equity through climate change price pressure (CCPP). Using a demand-based asset pricing framework, we estimate firm-level CCPP from physical and transition exposures over 2005-2021. A one-standard-deviation intensification of CCPP raises the cost of equity by up to 6% of its average, with banks and insurers as the main drivers. Yet firms do not subsequently improve environmental performance, indicating that the statistically significant effect of CCPP on cost of equity is ineffective to alter corporate behavior. Our CCPP metrics can help policymakers and investors design targeted environmental strategies.
Subjects: 
Climate exposures
Cost of equity
Institutional price pressure
Corporate environmental profiles
JEL: 
G11
G12
G13
G18
G31
G38
Q54
Q55
Document Type: 
Working Paper

Files in This Item:
File
Size





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