Why insider trades may be a key to measuring corporate climate risk

Post-disaster purchase activity found to yield better performance than average market reaction

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(Mark Hulbert, an author and longtime investment columnist, is the founder of the Hulbert Financial Digest; his Hulbert Ratings audits investment newsletter returns.)

CHAPEL HILL, N.C. (Callaway Climate Insights) — Investors wanting to reduce the risks their portfolios face from climate disasters should pay close attention to the transactions of corporate insiders.

That’s the implication of a just-completed analysis of the purchases and sales that insiders have undertaken in the wake of climate disasters affecting their companies. Titled “When Disasters Strike: How Do Corporate Insiders Respond to Climate Risk?,” the study was conducted by Matilde Faralli, a research fellow at the Bank of Italy, and Hedda Rytter Tveiten, a Ph.D. candidate in the economics department at Norway’s University of Bergen.

Corporate insiders are a company’s officers, directors and largest shareholders. They are required to more or less immediately report any transactions involving their companies’ shares to the Securities and Exchange Commission, and the authors of this new study analyzed all transactions involving U.S. insiders between 1999 and 2023. They focused in particular on those transactions undertaken in the immediate wake of climate disasters affecting the insiders’ companies.