Stefano Carattini, Andrew Young School of Policy Studies, Georgia State University

The Fin­ance Brown Bag Sem­inar is held by the In­sti­tute for Fin­ance, Bank­ing and In­sur­ance (WU Vi­enna) and the Vi­enna Gradu­ate School of Fin­ance (VGSF). It serves as a present­a­tion plat­form for PhD stu­dents, fac­ulty mem­bers, and vis­it­ors. An over­view of BBS on the web­site of the In­sti­tute for Fin­ance, Bank­ing and In­sur­ance.

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Stefano Car­at­tini, Andrew Young School of Policy Stud­ies, Geor­gia State Uni­versity

Cli­mate policy un­cer­tainty and firms’ and in­vestors’ be­ha­vior

Cli­mate change mit­ig­a­tion re­quires trans­ition­ing from a high- to a low-­car­bon economy. Over the last three dec­ades, this trans­ition has been far from lin­ear, with peri­ods of pro­gress and set­backs. While cli­mate policies have been the ob­ject of care­ful policy evalu­ation, firms and in­vestors may need to re­act more often to cli­mate policy un­cer­tainty than ac­tual cli­mate policy. We develop a new in­dex of cli­mate policy un­cer­tainty, cov­er­ing the United States with monthly-­level vari­ation between 1990 and 2019. We ana­lyze the re­la­tion­ship between cli­mate policy un­cer­tainty and firm­-­level out­comes such as stock re­turns, share price volat­il­ity, in­vest­ment in re­search and devel­op­ment as well as pat­ent­ing, cap­ital ex­pendit­ures, and em­ploy­ment for all pub­licly lis­ted firms in the coun­try. We find that cli­mate policy un­cer­tainty tends to con­sid­er­ably af­fect these out­comes, and often more so than ex­ist­ing in­dices of eco­nomic policy un­cer­tainty. The dir­ec­tion of the un­cer­tainty mat­ters as well, as meas­ured by sub­-in­dices cap­tur­ing whether the un­cer­tainty re­flects po­ten­tial ac­cel­er­a­tion or de­cel­er­a­tion in cli­mate poli­cy­mak­ing.