Was the Paris agreement a turning point? A worldwide stock market analysis

The aim of this paper is to analyze the reaction of stock markets around the world to three extreme events related to climate change: the records of GHG concentrations, the warmest years ever recorded since the pre-industrial era, and the collapse of ice shelves. Our results for the entire analysis period (1995-2022) are unexpected as we find that, on average, stock markets show significant positive abnormal returns to all the announcements, performing Europe better than the rest of the world. Nevertheless, the differential analysis of the stock market reaction after the Paris Agreement shows significant negative abnormal returns to the announcements of the three extreme climate events, finding a greater negative reaction for Europe. Consequently, this research shows that the Paris Agreement has led to a significant shift in the attitude of investors towards the risks and costs associated with climate change.