This study explores the links between climate transition risks, ESG sentiment and stock prices in the European context. It provides novel insights into the literature of sentiment-related stock markets, ESG's impact on firm market value, and climate-related financial analysis. Using an advanced methodology, including the time-varying parameter vector autoregressive (TVP-VAR) connectedness method and the quantile coherency technique, we uncover key findings on how ESG sentiment influences market behavior in the face of climate transition risks. Our main results indicate that European stock markets are highly vulnerable to climate transition risks, with sentiment acting as a key transmission channel. While positive ESG sentiment improves market valuation during stable periods, its effect weakens in times of market distress. Conversely, negative ESG sentiment strongly amplifies climate transition risk during both stable and unstable periods, dampening market enthusiasm and exacerbating market declines during instability. These effects persist through robustness tests, including an analysis of market volatility and a comparative study with the US context, where ESG uncertainty plays a key destabilizing role.

中文翻译：

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气候转型风险、ESG 情绪和市场价值：来自欧洲股市的见解

本研究探讨了欧洲背景下气候转型风险、ESG 情绪和股票价格之间的联系。它为与情绪相关的股票市场、ESG 对公司市场价值的影响以及与气候相关的财务分析的文献提供了新颖的见解。使用先进的方法，包括时变参数向量自回归 （TVP-VAR） 连通性方法和分位数相干技术，我们揭示了 ESG 情绪在面临气候转型风险时如何影响市场行为的关键发现。我们的主要结果表明，欧洲股市极易受到气候转型风险的影响，而情绪是关键的传导渠道。虽然积极的 ESG 情绪在稳定时期提高了市场估值，但在市场低迷时期，其影响会减弱。相反，负面的 ESG 情绪在稳定和不稳定时期都强烈放大了气候转型风险，抑制了市场热情，并在不稳定期间加剧了市场下跌。这些影响通过稳健性测试持续存在，包括对市场波动性的分析和与美国背景的比较研究，其中 ESG 不确定性起着关键的不稳定作用。