Impact of Climate Risk on Stock Market

This study provides an in-depth look at the intricate interplay between climate risk and its repercussions on the stock market, analyzing in detail the differences across markets and time intervals. The study reveals a notable correlation between climate risk and the stock market and that there are some variations in this relationship. Specifically, the U.S. market is more sensitive to climate risk, while the European market is relatively less so. In addition, the COVID-19 has a short-term impact. This study summarizes and generalizes the literature of the last three years and employs a variety of descriptive methods in order to reveal the intrinsic link between the two. The findings provide a crucial reference for investors and policy makers to gain a more nuanced comprehension of the ramifications of climate risk on equity markets. Subsequent investigations could go deeper into the relationship between climate risk on other financial markets (e.g., bond markets) and the differences in response to climate risk across different climate sectors.