Mind the Green Gap: Climate Attention and the Green Premium in Sweden

Sammanfattning

This thesis investigates the existence and dynamics of the green premium in Swedish equity markets. Using daily data on Swedish large-cap stocks between 2016 and 2025, we examine whether environmental characteristics are priced in firms' expected returns, and how this pricing varies with investor attention to climate change. To capture climate-related concern among Swedish investors, we construct a novel Climate Change News Index (CCNI) based on articles published by Dagens industri. We regress excess returns on firms' ESG scores and on the interaction between ESG scores and the CCNI, and complement the analysis with an examination of second moment dynamics in green and brown portfolios. Our findings are three-fold. First, a negative green premium exists over the period 2016-2024 but reverses in 2025, coinciding with a broad decline in ESG-related sentiment. Second, the green premium narrows during periods of heightened climate news coverage, suggesting that investors reallocate capital toward green assets when climate change is more salient in the media. Third, green firms exhibit lower volatility and lower downside risk than brown firms, indicating that environmental characteristics are reflected not only in expected returns but also in the broader risk profile of equities.