Environmental Risks and Financial Markets: A Two-Way Street

Jean‐Louis Bertrand and Bernard Sinclair‐Desgagné

in The Oxford Handbook of Business and the Natural Environment

Published in print November 2011 | ISBN: 9780199584451
Published online January 2012 | | DOI:

Series: Oxford Handbooks in Business and Management

 Environmental Risks and Financial Markets: A Two-Way Street

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This article reviews the dual role financial markets play in transmitting environmental information and providing instruments companies can use to manage environmental risks. It describes the impact of weather volatility on companies and economies, and the new market for weather derivatives. Moreover, it summarizes the current literature which considers how markets—stock markets in particular—react to weather events, corporate environmental disclosures, and news about environmental incidents. It states that financial statements as they exist today do not necessarily provide all the information that users need in order to make economic and investment decisions. Weather conditions affect company sales and activity sectors in different ways and with different intensities. Weather conditions do not just affect sales volumes. They can also influence business profitability. Thus, it is suggested that environmental events, in particular weather turbulences that may result from climate change, could have a significant financial impact on business and the economy.

Keywords: financial markets; environmental risks; weather turbulences; climate change; business profitability; economy; stock markets; corporate environmental disclosures; news

Article.  8372 words. 

Subjects: Business and Management ; Business Strategy

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