PhD Defence X.M. Hut

Abstract

It is increasingly clear that the economy and financial markets are influenced by climate change, and the reverse is also true. A growing body of research documents these interactions in detail. However, much of this literature focuses on short-term analyses, whereas climate change is inherently a long-term phenomenon. This thesis examines the impact of climate change on financial markets and vice versa, adopting a long-term perspective.

Physical climate disasters are expected to worsen over time. In the second chapter of this thesis, we analyze how long-term investors should respond to this. Specifically, we quantify how they can adjust their current investments in anticipation of future disasters.

The influence of financial markets on climate change also extends to long-term consequences. For instance, when a bank finances the construction of a coal plant, that plant will emit carbon dioxide for decades. In the third chapter, we examine the impact of voluntary initiatives that promote green lending on the financing of energy and infrastructure developments.

Sustainable investors are often characterized by a focus on long-term sustainability outcomes next to financial performance. In the fourth chapter, I investigate whether this shift in focus affects market quality by altering the type of information reflected in stock prices.

The studies in this thesis provide insights aimed at specific groups: long-term investors, lenders and policymakers concerned with lending, and sustainable investors. These findings consider the interplay between climate change and financial markets over the long term.