The Effects of Paris Climate Agreement on Stock Markets: Evidence from the German Stock Exchange

The paper investigates the effects of the 2016 Paris Climate Agreement on the German stock market. Our sample includes 20 announcements around the Paris Climate Agreement and 17 industries in Germany. We adopt and modify event study methodology developed by Brown and Warner (1980, 1985) and find that Paris Climate Agreement affected polluting industries in the short-term in terms of risk and return. Furthermore, we observed diamond risk structures when (1) COP 21 took place and (2) Paris Climate Agreement came into force. Our results suggest that Paris Climate Agreement is achieving its objectives in the short term.