Efforts to address climate change are among the most serious collective challenges facing the world, with governments seeking to establish frameworks to limit its long-term impacts. Alongside this public mission, however, climate negotiations also generate significant financial consequences. For some investors, market movements surrounding the annual United Nations Conference of the Parties (COP) climate talks represent an opportunity to profit from anticipated policy outcomes rather than a moment of environmental reckoning.

This dynamic is examined in a recent study published in Energy Economics by an Australian research team, which analysed trading activity linked to COP meetings. The researchers focused on so-called “informed traders, defined as investors who act on non-public information that allows them to trade ahead of broader market responses. Rather than reacting to policy announcements once they are public, these traders appear to position themselves in advance, based on early signals about how negotiations are likely to unfold.

The study finds that fossil fuel companies experience notable spikes in informed trading during COP meetings. Across the firms and conferences analysed, the researchers estimate that such trading could yield gains of up to US$25 billion. Professor Martina Linnenluecke, co-lead author of the paper and Director of the Centre for Climate Risk and Resilience at the UTS Business School, notes that COP negotiations are major global events with the potential to affect the valuation of fossil fuel firms materially. As a result, even subtle indications about the direction of talks can have significant market implications.

COP meetings involve thousands of delegates, industry representatives, and observers, creating complex information environments well before official outcomes are announced. The research team sought to determine whether individuals with early insights into the likely direction of negotiations were trading on that knowledge. To do so, they developed a new methodology to estimate the probability of informed trading, using data from 87 US-listed fossil fuel firms over the period from 2006 to 2023.

Their analysis shows that the strongest signals of informed trading tend to appear just before meetings formally begin, particularly on the days when delegates are arriving, and preliminary events are taking place. During these periods, fossil fuel stocks behave as though some market participants have advanced insight into climate policy outcomes. When negotiations are likely to lead to more substantial climate commitments, fossil fuel stocks fall, making early selling potentially profitable. When talks appear weaker, early buying can deliver gains.

The researchers estimate that informed traders could have earned up to US$25 billion across the meetings studied, with the most significant single estimated profit, more than US$12 billion, occurring around COP20. While such activity is not illegal and is not currently subject to specific regulation, the findings raise broader concerns. COP decisions shape the pace and direction of the global energy transition, and information imbalances during these negotiations risk undermining market fairness, investor protection, and the credibility of climate policy.

The authors argue that these results point to the need for stronger disclosure rules, clearer communication protocols, and safeguards to prevent privileged access to negotiation information from becoming a source of private gain. In negotiations designed to serve the global public interest, transparency may be as important as the policies themselves.

More information: Xiaoyan Chen et al, Informed trading and the fossil fuel industry’s influence over UN climate meetings, Energy Economics. DOI: 10.1016/j.eneco.2025.109065

Journal information: Energy Economics Provided by University of Technology Sydney