A Sustainable Pioneer in a House on Fire

Abstract: This paper examines the impact of the Paris agreement on firms on the Swedish stock market. Additionally, the firms were also categorized into sustainable and unsustainable firms by their Environmental Pillar Score (which is part of the ESG score) in order to investigate performance differences between the two groups. On top of that, a comparison between sustainable firms with the market index OMXS30 was performed. For the methodology, an event study over three events was conducted with CAPM as the normal return model. The events chosen were: (1) the signing of the Paris agreement, (2) Trump’s withdrawal from the Paris agreement, and (3) the release of the EU climate plan. This paper finds evidence that there exists a significant difference between the impact of the Paris agreement on the sustainable firms and on the unsustainable firms. Furthermore, it was found that the sustainable firms performed better than the unsustainable firms overall, however the study could neither prove that the performances were significant nor could evidence be found to support that the Paris agreement-related events had any significant impact on the firms. Although the impact is not statistically significant, it is evident that the events that are advantageous for the Paris agreement’s progression, demonstrates a negative impact on both sustainable and unsustainable firms, contrary to the event that is disadvantageous, which presents a positive impact. Moreover, evidence could not be found whether the sustainable firms outperformed the market index after the Paris agreement or not.