Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2023-07-24
Number: 23-041/IV
Author-Name: Philippe Loyson
Author-Workplace-Name: VU Amsterdam
Author-Name: Rianne Luijendijk
Author-Workplace-Name: DNB
Author-Name: Sweder van Wijnbergen
Author-Workplace-Name: University of Amsterdam 
Title: The pricing of climate transition risk in Europe’s equity market
Abstract: We assess whether climate transition risk is priced in Europe’s equity market by analysing relative
equity returns of high versus low CO2-emitting firms. We use a panel data set covering firm-specific carbon emissions of 1,555 European companies over the period 2005-2019. We add to
the existing literature by addressing problems in carbon data and by using various econometric
methods ranging from panel data analysis to the SCM. Fama-French style panel regressions at
both the individual firm level as well as portfolio level suggest that carbon intensity is negatively
related to stock returns. Treatment effect models, however, provide some evidence for increased
pricing of climate transition risk after the Paris Agreement. 
Classification-JEL: G12, Q54
Keywords: Climate Change, Carbon Emissions Intensity, Paris Agreement, Transition Risk Premia.
File-URL: https://papers.tinbergen.nl/23042.pdf
File-Format: application/pdf
File-Size: 4.548.555 bytes
Handle: RePEc:tin:wpaper:20230042