Hurricanes as news? Assessing the impact of hurricanes on the stock market returns of energy companies

Recent hydro-meteorological disasters have sparked popular interest in climate change and its role in driving these events. In this paper, we focus on the information provided by one such type of disaster, hurricanes, to capital markets. Because carbon dioxide emissions from the combustion of fossil fuels are the primary contributor to greenhouse gas concentrations, and their reduction is key to any climate change mitigation strategy, we focus on energy companies. We estimate the reaction of the stock market returns of the largest energy companies in the United States to the most notorious, economically damaging hurricanes in the North Atlantic Ocean in each of the last four decades prior to the Paris Agreement: Hugo (1989), Andrew (1992), Katrina (2005), and Sandy (2012). The event study analysis shows that the impacts are not large, but they are significantly different from zero. Further regression analysis shows that the impacts differ across energy companies based on their carbon intensity; firms with cleaner fuel mixes experienced positive cumulative excess returns relative to coal, and the difference is the largest and most persistent for renewable stocks.