Do Investors Care about Carbon Risk?

Patrick Bolton and Marcin Kacperczyk

No 26968, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper explores whether carbon emissions affect the cross-section of U.S. stock returns. We find that stocks of firms with higher total CO2 emissions (and changes in emissions) earn higher returns, after controlling for size, book-to-market, momentum, and other factors that predict returns. We cannot explain this carbon premium through differences in unexpected profitability or other known risk factors. We also find that institutional investors implement exclusionary screening based on direct emission intensity in a few salient industries. Overall, our results are consistent with an interpretation that investors are already demanding compensation for their exposure to carbon emission risk.

JEL-codes: G12 H23 Q54 (search for similar items in EconPapers)
Date: 2020-04
New Economics Papers: this item is included in nep-ene, nep-env, nep-fmk and nep-reg
Note: AP CF EEE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (58)

Published as Patrick Bolton & Marcin Kacperczyk, 2021. "Do investors care about carbon risk?," Journal of Financial Economics, vol 142(2), pages 517-549.

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Journal Article: Do investors care about carbon risk? (2021)
Working Paper: Do Investors Care about Carbon Risk? (2020)
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