On the carbon premium in Swiss stock returns

Jonas Heim and Thomas Nitschka

No 2025-13, Working Papers from Swiss National Bank

Abstract: This paper evaluates whether CO2 emission levels or emission intensities are firm characteristics that drive Swiss firms’ stock returns. We show that standard characteristics such as size and the book-to-market equity ratio are more important determinants of firm-level stock returns than are CO2 levels (intensities). Brown firms (high CO2 levels or intensities) tend to be large and exhibit low book-to-market equity ratios, whereas their green counterparts are small and exhibit high book-to-market equity ratios. This explains why return differences between brown and green firms are statistically indistinguishable from zero after controlling for exposures to standard risk factors.

Keywords: Climate change; CO2 emissions; Event study; Risk premium (search for similar items in EconPapers)
JEL-codes: G12 Q54 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2025
New Economics Papers: this item is included in nep-env and nep-sbm
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Persistent link: https://EconPapers.repec.org/RePEc:snb:snbwpa:2025-13

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