Publications
- Climate Risk Disclosure and Institutional Investors,
Review of Financial Studies (Lead Article), 2023, 36(7), 2617-2650.
w/ Philipp Krueger, Zacharias Sautner, and Laura Starks
Abstract
Employing disclosure theory, we develop hypotheses regarding the preferences of institutional investors with respect to firms’ climate risk disclosures. Through a survey and empirical tests, we test these hypotheses and provide systematic evidence suggesting that institutional investors value and demand climate risk disclosures, that climate-specific disclosure costs and benefits affect these demands, and that influence and selection effects explain the equilibrium relations between institutional ownership and disclosure. We establish evidence on the influence and selection effects of the climate risk disclosures by examining the French Article 173, the investor coalition Climate Action 100+, and the UK mandatory carbon disclosure regulation.
- Carbon Tail Risk,
w/ Zacharias Sautner and Grigory Vilkov Review of Financial Studies, 2021, 34(3), 1540-1571.Abstract
Strong regulatory actions are needed to combat climate change, but uncertainty makes it difficult for investors to quantify the impact of future climate regulation. We show that climate policy uncertainty is priced in the option market. The cost of option protection against downside tail risks is larger for firms with more carbon-intense business models. For carbon-intense firms, the cost of protection against downside tail risk is magnified at times when the public’s attention to climate change spikes, and it decreased after the election of climate change skeptic President Trump.
Working Papers
- Sea Level Rise and Portfolio Choice
Abstract
Many households face uninsurable background risks due to future sea level rise (SLR). Using detailed local variation in SLR exposure and disaggregated geographic information on households in the United States, I show that SLR exposed households participate less in the stock market compared to their unexposed counterparts within the same neighborhood. This effect is driven by long-run SLR risks as opposed to short-run flood risks and is elevated at times when attention to climate change is high. I provide causal evidence of the effect of SLR risks on household portfolio choices by exploiting plausibly exogenous variation stemming from the adoption of state-led climate change adaptation plans that reduced households' SLR risks. Additional tests isolate the effect of SLR exposure as a background risk from alternative explanations, including changes in house prices, past flooding experiences, endogenous location choices, political beliefs, or differences in risk preferences.