Journal of
Italian
Banking
Association

year 100
 

Forum | Papers » Stock market reaction to extreme weather events in the electrical sector

Stock market reaction to extreme weather events in the electrical sector

Roberto Bianchini, Vincenzo Butticè
November 2025 - n. 11
Keywords: Cambiamento climatico, eventi meteorologici estremi, rendimento anomalo, asset pricing, studio degli eventi
Jel codes: G32, G14, Q54

We analyze the reaction of the European stock market to extreme weather events, focusing on European electricity companies. These firms hold large, geographically dispersed portfolios of power plants, potentially exposed to multiple events. Our evidence shows that when an extreme weather event occurs in the area where a plant is located, investors react negatively in the short term; the response is stronger when the plant is nuclear, solar, or windpowered, and when the event is a storm or a heat wave. In addition, the market reaction is less negative for companies with a higher share of women on the board, more independent directors, and higher Esg scores. Overall, the results consistently support the idea that the market incorporates information on extreme events into asset prices and offer insight into the firm characteristics that mitigate this response.

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