Performance of energy ETFs and climate risks

Minh Nhat Nguyen, Ruipeng Liu and Youwei Li

Energy Economics, 2025, vol. 141, issue C

Abstract: We investigate whether green (brown) portfolios constructed from clean energy ETFs (fossil fuel ETFs) yield positive (negative) returns conditional on climate-related risks. While the green portfolios do not unconditionally outperform the brown ones, the outperformance of green portfolios is statistically significant under the conditional setting using non-parametric estimates with imposing inequality restrictions. Our conditional studies also show that brown portfolios are riskier than green ones with various measurements. We present the heterogeneity in the effect of climate information on the return and risk of green and brown portfolios. Furthermore, we document that fund flows for green assets are higher than those for brown ones during periods of high climate risks. Our findings are robust to alternative specifications.

Keywords: Clean energy ETFs; Fossil fuel ETFs; Climate risks; Inequality tests; Portfolio returns; Semibeta, idiosyncratic risks (search for similar items in EconPapers)
JEL-codes: C58 G11 G12 Q54 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:141:y:2025:i:c:s0140988324007400

DOI: 10.1016/j.eneco.2024.108031

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