Essays on Asset Prices and Climate Policies: Empirical and Theoretical Perspectives

Pricing Climate Uncertainty Risk: Do investors care about climate uncertainty? I answer this question using a consumptionbased
asset pricing model augmented with climate uncertainty. Investors trade-off current consumption and its impact on the climate, and climate uncertainty. I solve explicitly for asset prices quantities and use Bayesian methods to estimate the model. Climate uncertainty emerges as a direct factor as well as an indirect one due to the aggregate wealth factor stemming from recursive preferences, but I find that large explanatory power is held by intra-temporal climate
preferences rather than the specific risk itself. My structural model matches the main asset prices features. I estimate the share of investors climate preferences to be non-negligible and to vary substantially over time.

Do COPs really help sustainability? An asset pricing perspective: Do COP summits pressure investors to divest from brown firms and invest in green firms? This paper addresses this question using an event study that examines the impact of COP summits on the returns of brown and green firms during both intra-COP and post-COP periods. The findings reveal that COP events do not directly and significantly affect returns: while some
years exhibit an increase in green returns following COP summits, these effects are inconsistent and not uniformly attributable to the events, suggesting that they do not drive investors
divestment from brown firms in favor of green alternatives. However, I observe market reactions, particularly in the post-COP period, where green firms experienced an increase in their
returns. This might suggest that while COP events do not exert strong short-term influence, they may still contribute indirectly to investors behavior by shaping long-term expectations
about sustainability.