This paper finds evidence that stock returns vary with the physical climate change exposure of firms in a predictable manner. We construct measures of exposures to physical climate changes at the firm level, and find that firms with high climate change exposures experience lower future...

We investigate the uncertainty dynamics surrounding extreme weather events through the lens of option and stock markets by identifying market responses to the uncertainty regarding both potential hurricane landfall and subsequent economic impact. Stock options on firms with establishments...

We document strong abnormal effects due to U.S. landfall hurricanes over the period 1990 to 2017 on stock returns and illiquidity across portfolios of stocks sorted by market equity (ME), book-to-market equity ratio (BE/ME), momentum, return-on-equity (ROE), and investment-to-assets (I/A). ROE-...

It is increasingly recognized that a transition to sustainable finance is crucial to scale up the low-carbon investments needed to achieve the global climate targets. A main barrier to portfolios' decarbonization is the lack of conclusive evidence on whether low-carbon investments add value to a...

Major insurance and reinsurance firms have expressed concern that global warming poses economic threats to the industry due to increased risk of extreme weather events. Past studies have examined the connection between global warming trends and the value of insured damages. In principle, if...

The Security and Exchange Commission (SEC) has considered climate change as a risk issue since 2010. Several emission disclosure initiatives exist aimed at informing investors about the financial risks associated with a zero or low carbon transition. Stricter regulations, particularly in a few...

Asset pricing and climate policy are analyzed in a global economy where consumption goods are produced by both a green and a carbon-intensive sector. We allow for endogenous growth and three types of damages from global warming. It is shown that, initially, the desire to diversify assets...

There are concerns that climate-related physical and political risks are not yet properly reflected in asset prices. To address these concerns, we develop a dynamic asset pricing framework with rare disasters related to climate change. The novelty of this paper lies in linking carbon emissions...

If global warming is to stay below 2°C, there are four risks of assets stranding. First, substantial fossil fuel reserves will be stranded at the end of the fossil era. Second, this will be true for exploration capital too. Third, unanticipated changes in present or expected future climate...

This paper studies the interplay between environmental performance and financial valuation of firms in Latin America and the Caribbean. We provide insights into how environmental considerations are integrated into financial decision-making and investor behavior by analyzing the stock market...