Equity market’s response to environmental protection initiatives – Evidence from China

Climate change and carbon dioxide emissions reduction are attracting increasing attention. The relationship between environmental regulations and market performance has been widely discussed. However, limited research is undertaken to examine the market response to environmental protection initiatives. In September 2020, China announced its Carbon Neutrality Initiative, stating that the country would peak its carbon dioxide emissions before 2030 and achieve carbon neutrality by 2060. This study investigates the impact of this event on China’s stock market. The findings indicate that stocks in firms with a carbon neutral concept are responding positively to the climate change commitments of China’s government.