Pricing climate transition risk: Evidence from European corporate CDS
研究了欧洲公司气候转型指标对信用违约互换（CDS）隐含信用风险的影响，发现市场自2015年巴黎协定后对转型风险进行定价，碳密集型行业风险更高，但市场可能低估企业的转型管理努力和欧盟排放交易体系参与。
The European low-carbon transition towards net-zero emissions by 2050 is gaining momentum. This study analyzes a major European firm’s climate-related transition indicators and their impact on CDS-implied credit risk across different time horizons. Results reveal market pricing of transition risk across all tenors, especially since the 2015 Paris Agreement. Carbon-intensive sectors like Electricity, Gas, and Mining face heightened transition risk pricing. Interestingly, the market may undervalue a company’s transition risk management efforts and participation in the EU ETS, possibly due to market inefficiencies. Predicting allowance prices’ impact on financial performance in the EU ETS market is notably challenging due to unique supply–demand dynamics. • This study analyzes firms’ climate transition indicators and CDS credit risk impact. • CDS Market prices transition risk across all tenors, especially post-2015 Paris Agreement. • Carbon-intensive sectors face heightened transition risk pricing in CDS market. • CDS Market does not price ETS exposure; high-emitting ETS firms lack higher CDS spreads.