Geoclimate, geopolitics, and the geovolatility of carbon-intensive equity returns

Working paper

The systemic implications on carbon-intensive equity prices of the disruptive technological progress from decarbonising the global energy system are com pounded by the geopolitical nature of both the global oil market and transition risk. We show empirically that climate change news affects oil and gas stock return volatilities at the global scale. But not all geoclimatic shocks are alike. Climate change news increases global uncertainty around carbon-intensive equities and it amplifies the effects of oil volatility shocks when the news is bad. Moreover, the impact of climate change news on the global oil and gas carbon intensive equity market differs across topics and themes.

Authors: Campos-Martins, S; Hendry, D

• Publication status: Published
• Publisher: University of Oxford
• Article number: 948
• Series: Department of Economics Discussion Paper Series
• Publication date: 2021-09-28
• Paper number: 948
• Language: English
• Keywords: geoclimatic volatility shocks; transition risk; volatility factor models; financial volatility shocks; carbon-intensive equities