How stocks judge COPs: market impacts of climate conferences

Abstract International efforts to combat climate change almost inevitably entail relative earnings reductions for fossil fuel companies, and gains by renewable companies. This study investigates the relationship between climate change conference of the parties (COP) meetings and the stock market performance of selected publicly listed companies. Specifically, we compare the price formation of fossil fuel companies, ethically-rated (‘green’) companies and renewable energy companies during international climate negotiations, compared to the periods around them. We investigate changes in market behaviour during COPs using two different statistical approaches to assess both whole of the period and daily effects. Both methods find distinct increases in the values of stocks with high green ratings, but no changes in stocks of renewable companies and weaker and more statistically inconsistent decreases in the values of fossil fuel companies. No consistent results are found for variability measurements, other than general market variability increases during COPs. We show that, by contrast, Organization of the Petroleum Exporting Countries meetings produce very strong increases in the stock values and variabilities of fossil fuel companies, and fairly strong decreases in the value of renewables companies, showing that detectable changes during predictable events are generally plausible. We conclude that market behaviour so far appears to favour companies with lower environmental impact during COPs but does not convincingly shift company price formation in line with the necessary green transition.