How do clean energy investors feel about climate change?

Hany Fahmy was awarded a Research and Professional Development grant for a research project exploring the different types of climate sentiment and its impact on clean energy returns.

We argue that investors’ decision to hold clean stocks is influenced by climate sentiment. Positive (negative) climate sentiments increase (decrease) the demand for clean stocks, which causes their prices to fluctuate away from fundamentals. We use deep learning and natural language processing on a wide range of news articles and social media platforms to construct different types of climate sentiment indexes that measure different aspects of climate change. We use our indexes to assess the impact of climate sentiment on clean energy returns at the aggregate level using regime-switching regressions and at the firm-level using time series regressions across clean energy sub-sectors.