Abstract
The first Global Climate Strike on March 15, 2019, represented a historical turning point in climate activism. We investigate the cross-section of stock price reactions to this event for a large sample of European firms. The strike's unanticipated success caused a decrease in the stock prices of carbon-intensive firms. The effect appears to be driven by the increased public attention to climate activism. Furthermore, after the first Global Climate Strike financial analysts downgraded their longer-term earnings forecasts on carbon-intensive firms.
Highlights
As extreme weather events become more frequent and severe, the risks of climate change for our societies become dramatically evident
We argue that the success of Global Climate Strike, both in terms of participation and resonance, established a historical turning point in environmental activism, causing a shift in the general expectations in the economy about the environmental preferences of newest generations
Our analysis shows that a higher daily attention to climate activism is associated with a higher pricing of corporate carbon emissions on financial markets, in line with our results on the effects of the first Global Climate Strike
Summary
As extreme weather events become more frequent and severe, the risks of climate change for our societies become dramatically evident. Sustainalytics is a major provider of ESG research, whose scores are often used in academic finance research This measure is available for around 1,500 European firms, which allows us to analyze the relation between carbon intensity and stock prices at a more granular level. Our analysis shows that a higher daily attention to climate activism is associated with a higher (negative) pricing of corporate carbon emissions on financial markets, in line with our results on the effects of the first Global Climate Strike. Hong and Kacperczyk (2009) show that firms in the U.S involved in the production of alcohol, tobacco and gambling have higher expected returns than comparable stocks, implying a higher cost of capital They provide evidence of social norm effects on investments for these stocks, which are identified as “sin” stocks.
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