["International Journal of Finance &Economics, Volume 31, Issue 3, Page 3027-3058, July 2026. ", "\nABSTRACT\nUnder the context of the climate change we assess the impact of EU's legislative initiative on European stock markets. Specifically, we focus on its impact on energy and Environmental Social Governance (ESG) sectors for equity returns and volatility for a representative basket of EU countries (participating also in Eurozone) as well as countries outside Eurozone/EU. We derive a cross‐country event analysis for the European green deal (willingness to implement and legal adoption on EU level as long‐term strategy) and national climate laws. Moreover, we assess the efficient market hypothesis (EMH). Second, we expect the announcement effect of the law implementation to have an impact on industry sectoral stock markets' volatility. The EMH is initially exhibited and announcement‐dependent; stock market is pricing announcements inefficiently. We find negative cumulative abnormal returns (CARs) both in the ESG, energy industry sector indexes. Abnormal return (AR) volatility is found per se at the announcement day. The magnitude and sign for abnormal returns as well as cumulative abnormal returns are announcement‐dependent. Heterogeneity is present since ESG (green index) appears to exhibit more statistically significant cumulative abnormal returns than the energy index.\n"]