Working Paper: CEPR ID: DP18328
Authors: Marco Becht; Anete Pajuste; Anna Toniolo
Abstract: A common argument against divestment is that it discards voting power and has a small effect on stock prices. We argue that divestment is a statement of disapproval that aligns actions with words for effectiveness. We show that the Go Fossil Free divestment movement is a narrative with impact. Viral divestment pledges depressed the share prices of all high carbon emitters, including those with no divestment. Peak virality coincided with a concurrent rise in the carbon premium and preceded net-zero commitments. The introduction of these commitments effectively recast divestment from a moral statement to a strategic exercise in risk management.
Keywords: divestment; climate finance; carbon emissions; narratives; twitter; fossil fuel
JEL Codes: D23; K22; G32; G34
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Viral divestment pledges (G34) | Significant negative cumulative average abnormal returns (CAAR) for high carbon emitters (G12) |
| Viral divestment pledges (G34) | Downward pressure on stock prices of targeted companies (G34) |
| Viral divestment pledges (G34) | Negative impact on prices of other high carbon emitters (F69) |
| Introduction of net-zero commitments by governments (F64) | Alters perception of risk associated with high carbon investments (G40) |
| Viral divestment pledges (G34) | Influence public and regulatory sentiment (G38) |
| Viral divestment pledges (G34) | Impact market behavior of fossil fuel companies and high carbon emitters (G18) |