Carbon Stock Devaluation

Using global evidence, we show that high-emission firms tend to have lower price valuation ratios than low-emission firms in the same country, especially in recent years. The price gap coincides with heightened climate awareness following local natural disasters, as well as with the divestment from high-emission stocks by financial institutions and retail investors. In the presence of equity price pressure in the country, highemission firms reduce carbon emission intensities, increase green innovation activities, and downsize their operations. The changes we identify are unlikely a consequence of tighter environmental regulations, as private high-emission firms do not show the same results.