This dissertation investigates the differential effects on equity returns between green and brown US firms following the signing of the Paris Agreement in 2015 and the subsequent US withdrawal from the agreement in 2017. By performing a difference-in-difference analysis with panel data on 106 green firms and 203 brown firms, thedissertation investigates the impact of this type of concerted action on climate policy on US equity markets, in particular on firms' excess returns. Different definitions of green and brown firms are considered. It is found that broader definitions of green firms that consider social and governance aspects of the firms do not seem able to capture the impact of the climate policy events. However, a stricter definition of brown firms, focusing on the oil and gas industry indeed allows to find that these firms are penalized by the signing of the Paris Agreement. Moreover, no significant differential impact is found on the withdrawal nor the election of President Trump, suggesting that a less “environmentally friendly” policy did not benefit “brown” firms’ equity valuations as these may still need to adapt to climate change with or without explicit policy decisions. The findings may be attributed to factors such as the broad definition of “greenness” based on Environmental, Social, and Governance (ESG) scores, the anticipation of the withdrawal in advance, and the market's perception of the events.
Date of Award | 4 Jul 2023 |
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Original language | English |
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Awarding Institution | - Universidade Católica Portuguesa
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Supervisor | Carla Sofia Soares (Supervisor) |
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- Climate agreements
- Paris agreement
- Difference-in-difference analysis
- Equity valuation
The impact of climate agreements on US firms: a comparative analysis
Tindbæk, L. S. (Student). 4 Jul 2023
Student thesis: Master's Thesis