The Effect of News from COP28 on Green and Brown Stocks: A High-Frequency Analysis

The latest report by the Intergovernmental Panel on Climate Change acknowledges that to meet climate objectives, funding must significantly increase. Consequently, additional research on climate finance is essential. This paper adds to the literature by analysing the effect of news events surrounding the 28th United Nations Climate Change Conference on the performance of green and brown stocks. The conference marked the first time the parties agreed to transition away from fossil fuels in energy systems. We analyse whether the news and announcements around the COP28 were accompanied by jumps in green and brown stocks. The study employs high-frequency trading data to separate the diverse, and occasionally opposing, signals associated with the conference. We consider 30 stocks: 15 green stocks and 15 brown stocks. The stocks are selected from the European energy market. We motivate the choice by noting that the notion of green versus brown is better understood in the energy sector. Moreover, the European market is considered one of the leaders in climate policies. Our results indicate that the news and announcements around the COP28 had an e!ect on the financial performance of the selected stocks, signalling a potential reaction of investors to the event. The results are of interest to firms in the energy sector, governments, and policy makers in light of the increased importance that green finance has in achieving the goals set in the Paris Agreement.