Analysis shows temperature anomalies affect market valuation of climate-aligned firms, suggesting investor responses vary with intensity.
Climate change has intensified in recent years, with one of its notable consequences being an increased frequency of extreme temperature events—manifesting as both excessively hot and cold days driven by temperature anomalies. In this study, we examine how daily temperature anomalies affect the market valuation of climate-aligned firms in the United States, relative to broader market trends. Using economic valuations of 33 publicly traded U.S. firms associated with renewable energy, electric vehicles, hydrogen fuel, and other sustainability-focused sectors from 2010 to 2024, we assess the effect of temperature anomalies aggregated at the national level, weighted by population, real gross state product, and gross domestic product. Our findings reveal that temperature anomalies—whether unusually warm or cold—are associated with a same-day increase in the financial performance of environmentally friendly firms, followed by a reversal the next day. This short-lived effect is driven primarily by days when temperatures deviate from historical norms but remain within the usual comfort range. When anomalies are large enough to create extreme conditions—pushing already hot days hotter or cold days colder—the pattern reverses: returns decline on the day of the anomaly and rebound the following day. These results are robust to controls for macroeconomic conditions, including the 10-year Treasury–Federal Funds Rate spread, 3-month Treasury–Federal Funds Rate spread, and crude oil prices. Together, the findings highlight the transitory nature of climate-related investor responses and show that market reactions depend on whether temperature shocks merely depart from historical norms or push conditions into genuinely extreme territory.
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Choi et al. (2025) studied this question.
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