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The Dynamic Effect of Climate News on Financial Markets: Evidence from France

Author

Listed:
  • Hamza Bennani

    (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - Nantes Univ - IAE Nantes - Nantes Université - Institut d'Administration des Entreprises - Nantes - Nantes Université - pôle Sociétés - Nantes Univ - Nantes Université)

  • Samuel Ligonniere

    (CEPS - Centre d'Economie de l'ENS Paris-Saclay - Université Paris-Saclay - ENS Paris Saclay - Ecole Normale Supérieure Paris-Saclay)

Abstract

We investigate the dynamic response of stock markets to climate-related risks in France. Using a novel dataset of 15,049 newspaper articles from Les Echos, Le Figaro, and Le Monde, we construct climate risk indices, including subindices for physical and transition risks, and relate them to stock market returns of 137 French companies using local projections. We show that climate risk shocks have a negative impact on stock returns, with persistent effects lasting up to two years. Moreover, transition risks exacerbate these negative effects for brown firms more than for green firms. Hence, and contrary to the efficient market hypothesis, our findings suggest a delayed and gradual incorporation of climate-related information by investors, particularly for firms with higher carbon emissions. These results underscore the need to account for dynamic market responses to climate information, particularly in the context of the low-carbon transition.

Suggested Citation

  • Hamza Bennani & Samuel Ligonniere, 2025. "The Dynamic Effect of Climate News on Financial Markets: Evidence from France," Working Papers hal-04981801, HAL.
    • Handle: RePEc:hal:wpaper:hal-04981801
    Note: View the original document on HAL open archive server: https://hal.science/hal-04981801v1
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