Climate Change, risk factors and stock returns: A review of the literature

International Review of Financial Analysis, 79, 2022 

Abstract: This article reviews how climate change could be considered an additional source of market risk. I discuss the types of data needed to analyse the climate risk drivers that shape the dynamics of the equity market. I present empirical evidence at both the macro and micro-level, analysing whether and to what extent the equity market prices climate change and related risks. Top-down and bottom-up approaches are compared to understand which climate risk is more likely to affect the cross-section of stock returns, both within and across sectors. Emphasis is also placed on investors’ beliefs about climate change risks, and the related asset pricing implications are analysed. I conclude by illustrating further directions for both empirical and theoretical research in the field of climate finance. 

Climate Adaptation Disclosure: Does it bring home the green? with Alfonso Dufour, Len Shaffrey and Simone Varotto

Abstract: We examine the impact of climate adaptation disclosure on firm value. Using textual analysis of financial reports issued between 1996 and 2018 by UK listed firms, we demonstrate that the disclosure of material exposure to physical climate risks mitigates the negative effects of natural disasters on firm value. However, we observe that disclosing climate adaptation measures does not have any mitigating effect on firm value. We show that this heterogeneous response to alternative climate disclosure strategies arises from their asymmetric effects on investor uncertainty. Our results bear relevant implications for the development of optimal climate disclosure policies. 

Seminars:

• Surrey Business School,

• Welsh Quarterly Finance Series

Conferences:

• EFMA 2023 Annual Meeting, 

• Conference on Corporate Social Responsibility 2023 at the University of UMass Boston, 

• CREDIT International Conference on Social, Sovereign and Geopolitical Risks 2023, 

• EMG-ECB Workshop on the Open Economy of Climate Change 2023, 

• SESTEF 2023, 

• IRMC 2023, 

• Conference on CSR, the Economy and Financial Markets 2023, 

• FMI SIG Annual Conference 2023, SBS International Conference for Finance 2023, 

• BFGA 2023, 

• Vietnam Symposium in Banking and Finance 2023, 

• ICMA30 

• Climate and Finance Research Event.