Decarbonizing Institutional Investor Portfolios: Helping to Green the Planet or Just Greening Your Portfolio?

Vaska Atta-Darkua, Simon Glossner, Philipp Krueger and Pedro Matos
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Vaska Atta-Darkua: University of Virginia, Darden School of Business
Simon Glossner: Board of Governors of the Federal Reserve System
Philipp Krueger: University of Geneva - Geneva Finance Research Institute (GFRI); Swiss Finance Institute; European Corporate Governance Institute (ECGI); University of Geneva - Geneva School of Economics and Management
Pedro Matos: University of Virginia - Darden School of Business; European Corporate Governance Institute (ECGI)

No 25-42, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: We study how institutional investors that join climate-related investor initiatives decarbonize their equity portfolios. Decarbonization can be achieved either by re-weighting portfolios towards lower carbon emitting firms or alternatively via targeted engagements with portfolio companies to reduce their emissions. Our findings indicate that portfolio re-weighting is the predominant greening strategy by climate-conscious investors, in particular by those based in countries with carbon emissions pricing schemes. We do not uncover much evidence of engagement even after the 2015 Paris Agreement. Furthermore, we find no evidence that climate-conscious investors allocate capital towards firms developing climate patents, but they do re-weight towards firms starting to generate green revenues. Overall, our analysis raises doubts about the effectiveness of investor-led initiatives in reducing corporate emissions and helping an all-economy transition to “green the planet”.

Keywords: climate change; decarbonization; GHG emissions; sustainability; institutional investors; CDP; Climate Disclosure Project; Climate Action 100+ (search for similar items in EconPapers)
JEL-codes: G15 G23 G30 M14 (search for similar items in EconPapers)
Pages: 77 pages
Date: 2025-04
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp2542

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