Do Weather Variables Affect Stock Companies in the Same Way as Fundamental Variables? GARCH-Based Modeling and a Sustainable Finance Perspective on the Case of Banks Listed on the Warsaw Stock Exchange

This study examines the impact of a financial market anomaly (weather) as a physical climate risk on the stock returns and changes in trading volumes of 13 major banks listed on the Warsaw Stock Exchange (WSE) from 2020 to 2025, advancing our understanding of sustainable finance aspects. Employing GARCH-family models, the analysis contrasts these environmental factors with fundamental firm-specific and market-wide variables. The empirical findings demonstrate that fundamental variables, specifically the STOXX Europe 600 index and the EUR/PLN exchange rate, exhibit overwhelming dominance over the investigated bank stock returns and changes in trading volumes, subordinating the impact of meteorological factors. Nevertheless, the results reveal that deviations from average historical values for weather variables can affect stock returns and changes in trading volumes rather than nominal readings. Furthermore, extreme macro-financial volatility during the compounding 2020–2025 crises likely masked these high-frequency perturbations, supporting the efficient market hypothesis. These insights underscore the necessity of integrating localized physical climate risks into broader sustainability stress-testing and macroprudential frameworks in Central and Eastern Europe.