THE IMPACT OF GREEN POLICIES ANNOUNCEMENTS ON SECTORAL PERFORMANCE: AN ANALYSIS FROM THE QATAR STOCK EXCHANGE

Abstract

In recent decades, various governments have enacted green policies to solve the issue of exacerbating industrial pollution and environmental degradation. The emergence of green policies signifies a significant transition towards a low-carbon economy. Governments seek to establish a framework fostering sustainable practices and environmental responsibility through these initiatives. The frameworks exist to encourage financial activities to flourish in the long term in an environmentally sustainable fashion. However, implementing green policies may constrict various industrial operations, potentially reducing national production and contributing to short-term financial setbacks. Consequently, these policies can limit the investment options for the biggest drivers of the economy, which may indirectly influence the stock market. Therefore, one should evaluate the short-term financial implications of these environmental frameworks considering long-term financial and economic stability. While initial hurdles may arise, the goal of these policies is to establish a more sustainable and resilient economy. Qatar poses a unique challenge to enacting green policies, given its role as a major producer and consumer of fossil fuels and natural gas. As such, one may expect substantial resistance to green policy implementation in Qatar, which in turn suggests the potential for a turbulent financial period. In this regard, the relationship between green policies and Qatar's economic interests may have a substantial impact on the Qatar Stock Exchange (QSE) and its diverse sectors. The purpose of this study is to understand the effect of the announcements of green policies on the stock market in Qatar, given its heavy reliance on non-renewable energy sources. It investigates the impact of twenty-five green policy announcements on the Qatar Stock Exchange (QSE) and the associated risks, encompassing all seven sectors of QSE: banks and financial services, consumer goods and services, industrials, insurance, real estate, telecoms, and transportation. The study estimates abnormal returns (ARs) and cumulative abnormal returns (CARs) to determine the impact of green policy announcements on the performance of sectoral stock prices. The study also examines how these green policies influenced variations in systematic risk through various risk assessment techniques. The results highlight how promoting environmentally friendly policies created disparate impacts in the economy. While some green policy announcements had either positive or negative impacts, others showed no significant impact at all on the Qatar Stock Exchange (QSE). These differences across sectors can be attributed to their respective relationships with the specific policy announced. Additionally, the study indicates that green policy announcements involve systematic risk, influencing various market sectors and establishing high levels of market uncertainty. Policymakers should therefore consider a wide range of different approaches to setting public policy.