In Search of the Causal Greenium

We propose a regression discontinuity design to determine whether there is a difference in the expected returns of green versus brown securities (greenium). We analyze daily changes in option-implied expected returns following the outcome of close vote ecology-related shareholder proposals to estimate the causal impact of a small change in investors' aggregate greenness perception on expected returns. Upon proposals' passage, expected returns with a forecast horizon of 365 (730) days drop by approximately 7.2% (9.6%) relative to proposals' failure, indicating the existence of a negative greenium in US equity markets. We introduce a battery of fixed effects, account for multiple periods around shareholder proposal voting dates, and remove confounding governance and social proposals, and find that our results are robust in these specifications.