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A0386
Title: A time-varying Greenium for European stocks Authors:  Lucia Alessi - European Commission - Joint Research Centre (Italy) [presenting]
Elisa Ossola - European Commission - Joint Research Centre (Italy)
Roberto Panzica - European Commission - Joint Research Centre (Italy)
Abstract: The aim is to study the evolution of the Greenium, i.e. a risk premium linked to firms' greenness and environmental transparency, based on individual stock returns. The Greenium is associated with ith a priced `greenness and transparency' factor, which considers both companies' greenhouse gas emissions and the quality of their environmental disclosures. By estimating an asset pricing model with time-varying risk premia, we analyze the evolution of the European Greenium from January 2006 to December 2019. We show that the Greenium dropped after the Paris Agreement was reached in December 2015, indicating investors' willingness to earn a lower return, ceteris paribus, to hold greener and more transparent stocks. The Greenium started to increase again at the end of 2016, with the election of Donald Trump.