DP17207 The Russia-Ukraine War and Climate Policy Expectations: Evidence from the Stock Market

Author(s): Ming Deng, Markus Leippold, Alexander F Wagner, Qian Wang
Publication Date: April 2022
Date Revised: June 2022
Keyword(s): Climate transition risk, Energy, ESG, Event studies, inflation, resilience, Russia-Ukraine war, Stock returns
JEL(s): E3, G01, G14, Q54
Programme Areas: Financial Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=17207

In response to the Russian-Ukraine war, stocks more exposed to the regulatory risks of the transition to a low-carbon economy performed better, suggesting that investors expect an overall slow-down of that transition. Analysts increased their earnings estimates for these stocks. The stock price effects for transition risk were particularly strong in the US. In Europe, the effects were less pronounced or even opposite, arguably because market participants expect stronger policy responses supporting renewable energy sources in the face of the pronounced dependence of Europe on Russian oil and gas. These findings highlight an expected international divergence in the pace of the energy transition, with geopolitical tensions thus threatening the gains made so far in combating the global problem of climate change.