Journal article

Firm value and government commitment to combating climate change

N Soderstrom, Henk Berkman, Jonathan Jona

Pacific-Basin Finance Journal | Elsevier | Published : 2019

Abstract

We use portfolio time-series regression event-study methodology to examine the impact of government commitment to combating climate change on firm value. The Ceres/CookESG climate risk measure based on textual analysis of 10-K disclosures provides a useful summary measure of firm-specific climate risk We use this climate risk measure to form “climate risk hedge portfolios”: portfolios that take a long position in firms with a high exposure to climate risk and a short position in firms with low exposure to climate risk. For US firms, there is a significant −0.5% abnormal return for our hedge portfolio around signing of the Paris agreement, a significant 1% abnormal return around the election ..

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University of Melbourne Researchers

Grants

Funding Acknowledgements

We thank Jackie Cook from CookESG Research for providing us with the climate change disclosure data. We also thank Dave Michayluk and participants at AFAANZ 2017 and 2018 workshops for their valuable insights. Jona and Soderstrom acknowledge the financial support provided by a grant from the University of Melbourne Faculty of Business Administration.