Renato Faccini

“Dissecting Climate Risks: Are They Reflected in Stock Prices?”

Event description

Renato Faccini presented the paper “Dissecting Climate Risks: Are they Reflected in Stock Prices?” he co-authored with Rastin Matin and George Skiadopoulos. From the abstract:

We construct novel proxies of aggregate physical and transition climate risks by conducting textual analysis of Reuters climate-change news over 2000-2018. This analysis uncovers four textual risk factors related to the topics of U.S. climate policy, international summits, natural disasters, and global warming, respectively. The first two factors proxy transition risks, whereas the last two proxy physical risks. We find that only the climate policy factor is priced in the U.S. stock market, with the evidence being more pronounced over 2012-2018. The documented positive premium is consistent with the argument that investors hedge short-term transition risks. We validate this explanation using a narrative approach to mark the content of climate news. Our results imply that investors’ attention is an important driver of asset returns.

Moderator:

Pierre Monnin
Senior Fellow, CEP

Renato Faccini

Renato Faccini is Deputy Head of Research at Danmarks Nationalbank. Prior to joining Danmarks Nationalbank, Renato worked at the Bank of England (2008-2011) and at Queen Mary, University of London (2011-2019), as an associated professor. Renato was also a visiting scholar at University College London (2018) and a George fellow at the Bank of England (2019).

Paper and slides

"Dissecting Climate Risks: Are They Reflected in Stock Prices?" (Paper)

"Dissecting Climate Risks: Are They Reflected in Stock Prices?" (Slides)

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