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Climate change concerns and the performance of green versus brown stocks

David Ardia, Keven Bluteau, Kris Boudt (UGent) and Koen Inghelbrecht (UGent)
(2020) NBB Concerence 2020 : climate change : economic impact and challenges for central banks and the financial system, Proceedings. In NBB Working Paper Series p.1-45
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Abstract
We empirically test the prediction of Pastor, Stambaugh, and Taylor 2020 that green firms can outperform brown firms when climate change concerns strengthen unexpectedly for S&P 500 companies over the period January 2010 - June 2018. To capture unexpected increases in climate change concerns, we construct a Media Climate Change Concern index using climate change-related news published by major U.S. newspapers. We find a negative relationship between the firms’ exposure to the Media Climate Change Concerns index and the level of the firm’s greenhouse gas emission per unit of revenue. This result implies that when concerns about climate change rise unexpectedly, green firms’ stock price increases, while brown firms’ stock price decreases. Further, using topic modeling, we analyze which type of climate change news drives this relationship. We identify five themes that have an effect on green vs. brown stock returns. Some of those themes can be related to change in investors’ expectations about the future cash-flow of green vs. brown firms, while others cannot. This result implies that the relationship between concern and green vs. brown stock returns arises from both investors updating their expectations about the future cash-flows of green and brown firms and changes in investors’ sustainability taste.
Keywords
Asset Pricing, Climate Change, Sustainable Investing, ESG, Greenhouse Gas Emission, Sentometrics, Textual Analysis

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MLA
Ardia, David, et al. “Climate Change Concerns and the Performance of Green versus Brown Stocks.” NBB Concerence 2020 : Climate Change : Economic Impact and Challenges for Central Banks and the Financial System, Proceedings, 2020, pp. 1–45.
APA
Ardia, D., Bluteau, K., Boudt, K., & Inghelbrecht, K. (2020). Climate change concerns and the performance of green versus brown stocks. NBB Concerence 2020 : Climate Change : Economic Impact and Challenges for Central Banks and the Financial System, Proceedings, 1–45.
Chicago author-date
Ardia, David, Keven Bluteau, Kris Boudt, and Koen Inghelbrecht. 2020. “Climate Change Concerns and the Performance of Green versus Brown Stocks.” In NBB Concerence 2020 : Climate Change : Economic Impact and Challenges for Central Banks and the Financial System, Proceedings, 1–45.
Chicago author-date (all authors)
Ardia, David, Keven Bluteau, Kris Boudt, and Koen Inghelbrecht. 2020. “Climate Change Concerns and the Performance of Green versus Brown Stocks.” In NBB Concerence 2020 : Climate Change : Economic Impact and Challenges for Central Banks and the Financial System, Proceedings, 1–45.
Vancouver
1.
Ardia D, Bluteau K, Boudt K, Inghelbrecht K. Climate change concerns and the performance of green versus brown stocks. In: NBB Concerence 2020 : climate change : economic impact and challenges for central banks and the financial system, Proceedings. 2020. p. 1–45.
IEEE
[1]
D. Ardia, K. Bluteau, K. Boudt, and K. Inghelbrecht, “Climate change concerns and the performance of green versus brown stocks,” in NBB Concerence 2020 : climate change : economic impact and challenges for central banks and the financial system, Proceedings, Online, 2020, pp. 1–45.
@inproceedings{8743779,
  abstract     = {{We empirically test the prediction of Pastor, Stambaugh, and Taylor 2020 that green firms can outperform brown firms when climate change concerns strengthen unexpectedly for S&P 500 companies over the period January 2010 - June 2018. To capture unexpected increases in climate change concerns, we construct a Media Climate Change Concern index using climate change-related news published by major U.S. newspapers. We find a negative relationship between the firms’ exposure to the Media Climate Change Concerns index and the level of the firm’s greenhouse gas emission per unit of revenue. This result implies that when concerns about climate change rise unexpectedly, green firms’ stock price increases, while brown firms’ stock price decreases. Further, using topic modeling, we analyze which type of climate change news drives this relationship. We identify five themes that have an effect on green vs. brown stock returns. Some of those themes can be related to change in investors’ expectations about the future cash-flow of green vs. brown firms, while others cannot. This result implies that the relationship between concern and green vs. brown stock returns arises from both investors updating their expectations about the future cash-flows of green and brown firms and changes in investors’ sustainability taste.}},
  articleno    = {{395}},
  author       = {{Ardia, David and Bluteau, Keven and Boudt, Kris and Inghelbrecht, Koen}},
  booktitle    = {{NBB Concerence 2020 : climate change : economic impact and challenges for central banks and the financial system, Proceedings}},
  keywords     = {{Asset Pricing,Climate Change,Sustainable Investing,ESG,Greenhouse Gas Emission,Sentometrics,Textual Analysis}},
  language     = {{eng}},
  location     = {{Online}},
  pages        = {{395:1--395:45}},
  title        = {{Climate change concerns and the performance of green versus brown stocks}},
  url          = {{https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3717722}},
  year         = {{2020}},
}