Working Paper: CEPR ID: DP17207
Authors: Alexander F. Wagner; Ming Deng; Markus Leippold; Qian Wang
Abstract: This study develops novel text-based proxies of corporate exposure to the low-carbon transition and applies them to study investor responses to major events. US stocks with greater regulatory transition risk outperformed in response to the Russia-Ukraine war, though firms with renewable energy opportunities also benefited temporarily. The US Inflation Reduction Act (IRA) also favored both types of firms, suggesting that the pricing of climate risk does not generally follow a one-dimensional “brown vs. green” framework. In Europe, if anything, high-transition risk firms suffered. These results indicate an international divergence in the pace of energy transition.
Keywords: Inflation; ESG; Stock Returns; Energy Resilience; Event Studies; Climate Transition Risk; Russia-Ukraine War
JEL Codes: E3; G01; G14; Q54
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Russia-Ukraine war (D74) | U.S. firms with greater exposure to transition risks performance (L25) |
| Russia-Ukraine war (D74) | European firms with high transition risk performance (P34) |
| U.S. Inflation Reduction Act (E31) | U.S. firms with greater exposure to transition risks performance (L25) |
| U.S. Inflation Reduction Act (E31) | firms with renewable energy opportunities performance (L25) |
| Russia-Ukraine war (D74) | investor expectations for renewable energy support (Q47) |
| Russia-Ukraine war (D74) | climate risk pricing (Q54) |