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on Resource Economics |
| By: | Konrad Adler (University of St. Gallen - School of Finance; Swiss Finance Institute); Oliver Rehbein (Vienna University of Economics and Business); Matthias Reiner (Vienna University of Economics and Business); Jing Zeng (University of Bonn; Centre for Economic Policy Research (CEPR)) |
| Abstract: | This paper proposes a simple but effective tool to measure firms' exposure to climate risk: the market. We develop a model showing that abnormal stock returns around significant climate policy events measure a firm's exposure to climate risk. Building on this theoretical foundation, we create market-based greenness measures based on abnormal returns around UN climate conferences. Our measurement of climate risk covers around 36, 000 international firms, a tenfold increase relative to existing measures. It is associated with lower present and future carbon emissions and provides explanatory power distinct from existing climate risk measures. Market-based green firms are more likely to file green patents, have lower stock-price volatility, and tend to be financially more robust. At the country level, market-based greenness is associated with lower emission intensity and a larger share of renewable energy. |
| Keywords: | greenness, green firms, climate risk, climate change |
| JEL: | G14 G32 G38 Q54 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:chf:rpseri:rp25104 |
| By: | Ludington, Evan; Liao, Yanjun (Penny) (Resources for the Future); Walls, Margaret A. (Resources for the Future) |
| Abstract: | In 2022, California implemented a major insurance reform requiring insurance companies to provide premium discounts to policyholders who undertake wildfire hazard mitigation, such as installation of fire-resistant roofs, vents, and windows and maintaining defensible space around homes. To evaluate early implementation of this reform, we draw on insurance rules and rate filings to create a database of mitigation discounts offered by insurers. We analyze how discount amounts vary across mitigation measures, insurers, and regions, and assess whether they are large enough to motivate homeowners to undertake these actions. We also compare the California policy to similar policies in states subject to hurricane and windstorm risks. Our results indicate that the current discounts are small: the costs of property retrofits are orders of magnitude greater than the insurance savings. They are also considerably smaller than wind insurance discounts in other states, which we attribute largely to greater uncertainty in the effectiveness of individual wildfire mitigation efforts, coupled with risk externalities from structure-to-structure fire spread and community-level fuel hazards that weaken the link between household-level investments and expected insurer losses. |
| Date: | 2025–12–10 |
| URL: | https://d.repec.org/n?u=RePEc:rff:dpaper:dp-25-30 |
| By: | Haozhou Gong (The University of Hong Kong - Faculty of Business and Economics); Chen Lin (The University of Hong Kong - Faculty of Business and Economics); Zacharias Sautner (University of Zurich - Department of Finance; Swiss Finance Institute; European Corporate Governance Institute (ECGI)); Thomas Schmid (The University of Hong Kong - Faculty of Business and Economics) |
| Abstract: | Renewable energy (RE) is vital for addressing climate change, but the land use of hydro, solar, and wind plants can negatively affect biodiversity through habitat destruction. By combining spatial biodiversity data, satellite imagery, and asset-level information on 40, 911 RE plants, we develop a novel measure of RE’s biodiversity impact around the world. We find that solar plants cause the greatest negative impact overall, while hydro plants are located in the most biodiversity-sensitive areas. The biodiversity impact of RE has grown substantially over time, driven by increased land use and siting in more biodiversity-sensitive locations. The top 1% of plants and owners are responsible for the majority of the impact. We use our measure in three corporate finance applications. Publicly-listed and non-financial ownership, as well as balance-sheet financing, are each associated with siting RE projects in higher-impact locations, while private and financial ownership, as well as project finance, align with lower-impact siting choices. These results suggest that ownership structure and financing design translate into systematically different environmental footprints in project siting. |
| Keywords: | Renewable energy, Biodiversity risk, Nature risk |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:chf:rpseri:rp2598 |