Abstract
It is widely believed that climate change can affect the financial performance of firms. In this chapter, we conceptualise the effects of climate change on the financial performance of firms. We explain that these effects have a twofold justification. First, climate change has been induced in the modern business as a form of pollution prevention. Therefore, firms that decrease their emissions can avoid environmental regulations and attract shareholders. Second, behavioural finance literature has shown that investors prefer environmental firms because they extract utility by holding these stocks. We empirically test the former channel. Results indicate that decreasing Greenhouse gases can indeed improve firms’ performance. Although, results are robust across three different regions; North America, Europe and Asian-Pacific, firms in the EU enjoy the highest benefits by engaging in emissions reductions.
Original language | English |
---|---|
Title of host publication | Applications in Energy Finance |
Subtitle of host publication | The Energy Sector, Economic Activity, Financial Markets and the Environment |
Editors | Christos Floros, Ioannis Chatziantoniou |
Publisher | Palgrave Macmillan |
Pages | 195-215 |
Number of pages | 21 |
Edition | 1st |
ISBN (Electronic) | 9783030929572 |
ISBN (Print) | 9783030929565 |
DOIs | |
Publication status | Published - 15 May 2022 |
Keywords
- carbon performance
- climate change
- climate-finance
- financial performance
- greenhouse gas emissions