Title: The Concern in Climate Change News: A Driver of Flight-to-Green Investment Episodes?
Abstract: Climate change can have a negative economic, social, and environmental impact. Investors can help in fighting climate change is buying “Green” firms and selling “Brown” firms. Several studies, however, indicate that green assets underperform brown assets, therefore incurring a cost for being a green investor. The recent asset pricing model of Pastor et al. (2020), however, suggests that green assets can outperform brown assets when concern about climate change is unusually large among investors. We empirically study this result by deriving climate change concerns indices using news articles from highly read US newspapers. We evaluate if a high value of climate change concern is associated with a higher abnormal return of a green minus brown portfolio from the S&P 500 universe between 2003 to 2017. Overall, our results indicate that high (low) climate change concern implies higher (lower) abnormal returns in a green minus brown portfolio. Furthermore, we demonstrate that not all topics surrounding the climate change discussion in the media drive concern among investors.