Investor Rewards to Climate Responsibility:Stock-Price Responses to the Opposite Shocks of the 2016 and 2020 U.S. Elections

Donald Trump's 2016 election and his nomination of climate skeptic Scott Pruitt to head the Environmental Protection Agency drastically downshifted expectations on U.S. policy toward climate change. Joseph Biden's 2020 election shifted them dramatically upward. We study firms' stock-price movements in reaction. As expected, the 2016 election boosted carbon-intensive firms. Surprisingly, firms with climate-responsible strategies also gained, especially those firms held by long-run investors. Such investors appear to have bet on a ``boomerang'' in climate policy. Harbingers of a boomerang already appeared during Trump's term. The 2020 election marked its arrival.