Publicação
The role of climate transition risk on the performance of european equity markets
| Resumo: | This study analyzes the relationship between climate transition risk and performance of the European equity market measured by stock total returns, using a sample of listed companies belonging to the Euro Stoxx 600 index between 2006-2022. Proxies for each of three drivers of transition risk (mitigation policies, preference change and technology) plus a series of control variables are used. Ambiguity on previous literature is perceived, thus various regression methods are applied to find a consensus regarding the effect of this risk on European stock performance. We find that the dominant driver is mitigation policy, and the impact is significant but complex, suffering from potential endogeneity and non-linearity issues. We can see a positive association between the respective variables, which is favourable to the existence of a carbon premium required by investors, but the opposite is also found, suggesting that a firm becoming greener is increasingly being rewarded. This supports the disinvestment and carbon alpha hypotheses, given the recent greater attention to climate issues. |
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| Autores principais: | Pereira, Tiago Miguel Gomes Portugal Dias |
| Assunto: | Climate change Carbon emissions Transition risk European stock returns Mitigation policies Preference change Technology risk Alterações climáticas Emissões de carbono Risco de transição Retornos de ações europeias Políticas de mitigação Mudanças de preferência Risco tecnológico |
| Ano: | 2024 |
| País: | Portugal |
| Tipo de documento: | dissertação de mestrado |
| Tipo de acesso: | acesso aberto |
| Instituição associada: | Universidade de Lisboa |
| Idioma: | inglês |
| Origem: | Repositório da Universidade de Lisboa |
| Resumo: | This study analyzes the relationship between climate transition risk and performance of the European equity market measured by stock total returns, using a sample of listed companies belonging to the Euro Stoxx 600 index between 2006-2022. Proxies for each of three drivers of transition risk (mitigation policies, preference change and technology) plus a series of control variables are used. Ambiguity on previous literature is perceived, thus various regression methods are applied to find a consensus regarding the effect of this risk on European stock performance. We find that the dominant driver is mitigation policy, and the impact is significant but complex, suffering from potential endogeneity and non-linearity issues. We can see a positive association between the respective variables, which is favourable to the existence of a carbon premium required by investors, but the opposite is also found, suggesting that a firm becoming greener is increasingly being rewarded. This supports the disinvestment and carbon alpha hypotheses, given the recent greater attention to climate issues. |
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