Projects
Funded by: Fondazione Eni Enrico Mattei
January 2021 / December 2021

Econometrics Analysis of Firms’ Climate Risks (EARisk)

In a world characterised by a rapidly changing climate due to the anthropogenic pressures on the environment, firms’ environmental performance and their exposure to climate change risks are increasingly under scrutiny. For instance, disclosing information about environmental performance in terms of natural resources use and carbon footprint may shift customers’ preferences and consequently affect firms’ economic performance. In particular, in listed companies this disclosure may also influence asset allocation decisions, which may influence also the firms’ financial performance. The EARisk project focuses on the econometric modelling of the existing relationships between firms’ financial performance and their environmental performance and climate risk exposure, with particular attention to listed companies operating in multiple sectors and different geographical regions.

Main Results and Outputs
  • Construction of a company-level indicator tracking the climate risk perception, in particular in the proximity of climate-related influential events, using text-mining algorithms applied to the daily social-media activity of companies;
  • Construction of a company-level indicator measuring climate risk perception using text-mining algorithms applied to the risk sections of mandatory disclosure documents;
  • Analysis of the impact of climate risk perception on daily abnormal stock returns on the financial markets;
  • Analysis of the impact of climate risk perception and environmental performance on annual stock returns;
  • Analysis of the impact of climate risk perception and environmental performance on bond risk premium.

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