Conference Agenda

This study examines the exogenous shock of the 26th UN Climate Change Conference (COP26) on the carbon footprints of 28 U.S. ESG exchange-traded funds (ETFs) managed by the Principles for Responsible Investment (PRI) signatories. Using a difference-in-differences (DID) framework, we find that ESG ETFs experienced a significant increase in carbon footprint following COP26 compared to conventional ETFs. The increase is more pronounced among funds with smaller fund size. The increase in portfolio carbon footprints suggests that ESG ETFs may have prioritized symbolic compliance over genuine decarbonization. The preference for symbolic over substantive decarbonization reflects a behavioral agency mechanism in which loss aversion and perceived risk trade-offs shape fund managers’ ESG decisions. The evidence reveals a discrepancy between ESG labelling and actual portfolio outcomes, highlighting the potential greenwashing within passive ESG investment products.

Climate change has emerged as a material source of financial risk for banks, yet

empirical evidence on how banks internalize physical climate risk in their credit risk management remains limited outside advanced economies. This study investigates whether banks operating in the Middle East and North Africa (MENA) region incorporate climate change physical risk into their loan loss provisioning behavior. Our results reveal a positive and statistically significant association between climate vulnerability and LLPs, suggesting that banks increasingly internalize climate-related physical risk as a forward-looking component of credit risk. These findings indicate that provisioning behavior-long viewed as a reflection of economic cyclicality-is increasingly responsive to environmental risk exposures. This effect is economically and statistically stronger among banks operating in Gulf economies and among well capitalized banks, indicating that institutional capacity and capital buffers play a critical role in enabling the proactive recognition of climate risk. Robustness tests using another proxy for climate change risk further support our findings, showing that stronger national adaptive capacity mitigates the need for precautionary.

provisioning.

This paper develops a novel framework to quantify asset-level physical climate risk and examine its financial consequences for a globally listed sample of manufacturing firms. Drawing on high-resolution geospatial data from Google Earth Engine and financial data from Bloomberg and Refinitiv Eikon, to obtain these results, the paper develops an asset-level, multi-hazard physical climate risk framework at the global scale. We construct four distinct climate risk indices - Flood Risk (FRI), Drought Risk (DRI), Wildfire Risk (WRI), and Tropical Cyclone Risk (TCRI), at the plant level for 969 industrial facilities operated by 505 firms across 87 countries over 2015–2022. Each index is grounded in the Hazard–Exposure–Vulnerability (HEV) framework and aggregated to the firm level using production-capacity weights. Panel regressions with two-way cluster-robust standard errors reveal that flood risk exerts a statistically significant negative effect on monthly stock returns, while tropical cyclone exposure carries a modest positive premium. Climate-adjusted returns, constructed by stripping out the fitted contribution of all four hazard indices, are on average 6.1 percentage points higher per month than observed returns, confirming that physical climate exposures systematically depress firm-level performance. Value at Risk (VaR) and Conditional VaR (CVaR) estimates, derived from both historical simulation and GARCH-based Monte Carlo methods, show that climate adjustment reduces portfolio-level tail risk by 32–43% at the 95th percentile and firm-level tail risk by 25–33% on average. These results demonstrate that physical climate risk is materially underpriced in manufacturing equities and that its omission leads to meaningful underestimation of downside exposure. The findings carry direct implications for risk managers, institutional investors, financial institutions and climate disclosure policy.

Keywords: Physical climate risk, manufacturing sector, asset-level analysis, geospatial finance, VaR, CVaR, flood, drought, wildfire, cyclone, panel regression

JEL Classification: G32, Q54, Q56, C58, G11, L60

Investor attention is limited. When major events occur, such as wars or pandemics, investor focus can concentrate on these dominant issues, leaving others overlooked. This study examines the implications of limited attention for international market-implied volatility dynamics and spillovers linked to climate risks. We analyse the impact of climate news, both physical and transition, on implied volatility and spillovers in U.S. and European stock markets using multivariate analysis of exogenous news shocks on daily volatility indices. Drawing on advanced textual analysis of over 1.5 million news articles, we construct a novel daily “maximum attention” index that identifies the leading news topic-event each day, grouped into twelve categories, including war, energy, economics, and geopolitics. We find that the effects of transition climate risks on volatility and spillovers have grown since the Paris Agreement. Still, the broader influence of climate risks is significantly moderated by attention to non-climate news, particularly during major geopolitical events. Our results further highlight that other large-scale events such as wars, energy crises, and economic disruptions dilute the financial relevance of climate risks, weakening their impact on market volatility and cross-border contagion.