IMF Working Papers

Climate News and Asset Valuations: Insights from Latin America

By Muhsin Ciftci, Christina Kolerus

February 7, 2025

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Format: Chicago

Muhsin Ciftci, and Christina Kolerus. "Climate News and Asset Valuations: Insights from Latin America", IMF Working Papers 2025, 037 (2025), accessed March 17, 2025, https://0-doi-org.library.svsu.edu/10.5089/9798229000932.001

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

We study the impact of climate-related news on asset prices in eight Latin American countries. We use both newspapers and official announcements to construct daily, country-specific indices via textual analysis, reflecting media coverage of transition risks, climate opportunities, regulatory actions, and physical risks. Leveraging an unbalanced daily panel data set of 628 firms from 2000 to 2023, we find a significant and robust climate risk premium in Latin America, which is higher for "browner" firms and has increased in more recent years. Focusing on major climate policies announced in official gazettes after the legislative process has been completed, we show that the publication of the laws is associated with a protracted decline in the relative stock prices of high-emission firms.

Subject: Climate change, Climate policy, Environment, Greenhouse gas emissions, National accounts, Return on investment

Keywords: Caribbean, Climate Change, Climate news, Climate opportunity, Climate policy, Climate policy news, Climate Risk Premium, Financial Asset Pricing, Global, Greenhouse gas emissions, Return on investment, Textual Analysis, University Frankfurt IMF

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