When natural disasters spark panic selling, U.S. stocks and bonds of companies with stronger environmental profiles fall under less pressure, according to research from Australia’s Monash University.
“The United States is among the top three countries hit by the greatest number of natural disasters over the past two decades,” Monash University’s Thanh Huynh and Ying Xia said in their recent paper examining how investors react to natural disasters. “Extreme climatic events” will cost most metropolitan areas in the U.S. at least one percent of gross domestic product by 2060-2080, they said, citing BlackRock’s 2019 prediction.
That estimate was based on a “no climate action” scenario, according to the researchers, who noted companies’ sales suffer when they are struck by natural disasters such as hurricanes, wildfires, tornadoes, floods and droughts. They found that sell-offs in stocks and bonds are “less pronounced” for companies with a high environmental score — despite equal sale losses.