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War and Policy: Investor Expectations on the Net-Zero Transition

Author

Listed:
  • Deng, Ming
  • Leippold, Markus
  • Wagner, Alexander F.
  • Wang, Qian

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.

Suggested Citation

  • Deng, Ming & Leippold, Markus & Wagner, Alexander F. & Wang, Qian, 2022. "War and Policy: Investor Expectations on the Net-Zero Transition," CEPR Discussion Papers 17207, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:17207
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    Cited by:

    1. D’Ercole, Francesco & Wagner, Alexander F., 2023. "The green energy transition and the 2023 Banking Crisis," Finance Research Letters, Elsevier, vol. 58(PC).
    2. Ferriani, Fabrizio & Gazzani, Andrea, 2023. "The impact of the war in Ukraine on energy prices: Consequences for firms’ financial performance," International Economics, Elsevier, vol. 174(C), pages 221-230.
    3. Ioannis Dokas & Georgios Oikonomou & Minas Panagiotidis & Eleftherios Spyromitros, 2023. "Macroeconomic and Uncertainty Shocks’ Effects on Energy Prices: A Comprehensive Literature Review," Energies, MDPI, vol. 16(3), pages 1-35, February.
    4. Basnet, Anup & Blomkvist, Magnus & Galariotis, Emilios, 2022. "The role of ESG in the decision to stay or leave the market of an invading country: The case of Russia," Economics Letters, Elsevier, vol. 216(C).
    5. Bougias, Alexandros & Episcopos, Athanasios & Leledakis, George N., 2022. "Valuation of European firms during the Russia–Ukraine war," Economics Letters, Elsevier, vol. 218(C).
    6. Lastauskas, Povilas & Proškutė, Aurelija & Žaldokas, Alminas, 2023. "How do firms adjust when trade stops?," Journal of Economic Behavior & Organization, Elsevier, vol. 216(C), pages 287-307.
    7. Nerlinger, Martin & Utz, Sebastian, 2022. "The impact of the Russia-Ukraine conflict on energy firms: A capital market perspective," Finance Research Letters, Elsevier, vol. 50(C).
    8. Umar, Muhammad & Riaz, Yasir & Yousaf, Imran, 2022. "Impact of Russian-Ukraine war on clean energy, conventional energy, and metal markets: Evidence from event study approach," Resources Policy, Elsevier, vol. 79(C).
    9. Anup Basnet & Emilios Galariotis & Magnus Blomkvist, 2022. "The role of ESG in the decision to stay or leave the market of an invading country: The case of Russia," Post-Print hal-03689077, HAL.

    More about this item

    Keywords

    Inflation; ESG; Stock returns; Energy; Resilience; Event studies; Climate transition risk; Russia-ukraine war;
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • G01 - Financial Economics - - General - - - Financial Crises
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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