Firm Value and Government Commitment to Combating Climate Change

•We examine the impact of government commitment to combating climate change on firm value.•The Ceres/CookESG climate risk measure based on 10-K disclosures is a useful measure of firm-specific climate risk.•We use this climate risk measure to form “climate risk hedge portfolios”.•There is a significant -0.5 percent abnormal return for our US hedge portfolio around signing of the Paris agreement.•For US firms, there is a significant 1 percent abnormal return around the election of President Trump.•There is a further positive abnormal return of around 4 percent in the six months following President Trump’s inauguration.•Non-US polluters were disadvantaged by the actual policies of the Trump government.•Californian state-level regulation acted as an effective substitute for federal level regulations.

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