The study found the price of wine was affected regardless of whether the climate event occurred in the relevant geographical region, or elsewhere.
Photo: Photo / 123RF
Climate-related news can be a driver of how much investors will pay for premium wine as well as other asset classes, such as stocks and bonds.
A study by University of Auckland finance academic Dr Gertjan Verdickt indicates negative climate-related news could drive down the price of investment-grade wines by a much as 3.6 percent.
“A growing body of research shows that personal experiences influence financial decision-making, and climate news and events are no exception,” Verdickt said.
“Events like unusually hot weather or poor air quality can alter how people invest and spend.”
For example, he said, research indicated the price a person was willing to pay for a NZ$818 bottle of Bordeaux Premier Cru would fall by about NZ$29, given a spike in climate-related news.
“One theory suggests that heightened awareness of climate risks prompts investors to seek out assets perceived as resilient, thereby driving up their value,” he said
“Another view is that climate awareness makes people more cautious, highlighting the vulnerabilities of certain assets and reducing demand.”
He said it could be investors were perhaps choosing to invest in cheaper premium wines, produced closer to home, rather than in old world wines from France.
“So you don’t have to go to Burgandy to buy a good pinot wine,” he said, adding a NZ$340 bottle of new world wine could be as-good or a better investment.
In any case, Verdickt said the price of wine was affected regardless of whether the climate event occurred in the relevant geographical region, or elsewhere.
He said a phenomenon called ‘climate extrapolation’ happened when investors projected climate news from their local environment onto an asset’s valuation, even if that asset was tied to a different geography.
The study tested how climate news affected what buyers were willing to pay for the same bottle of wine in different countries, involving more than 70,000 auction transactions from auction houses that sell wines from five Bordeaux Premier Cru producers in France.
“These are considered the best in the world. Because of their reputation, they are highly sought after, and the average bottle costs around US$480 (NZ$818),” Verdickt said.
He said the Bordeaux Premier Cru wines had dedicated investment funds and were considered investment-grade wines.
“At the same time, these wines are frequently traded, which makes them a good product for analysis.”
Verdickt said the main take-away was climate change news did affect the value of asset classes.
“There is a lot of literature that shows that it affects bonds, corporate bonds… it affects stock prices,” he said.
“People extrapolate their own experience onto the valuation of assets, even though those assets are being produced in a totally different geography.”
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Dining and Cooking