Does it pay to invest in environmental stocks?

Panagiotis Tzouvanas and Emmanuel C. Mamatzakis

International Review of Financial Analysis, 2021, vol. 77, issue C

Abstract: This paper examines market-based returns and risks of environmental vis-à-vis non environmental stocks from a portfolio selection point of view. The selection of environmental stocks is a function of greenhouse gas emissions of firms in S&P 500 for the period from 2005 to 2018. Our findings show that stocks with superior environmental performance have lower idiosyncratic risk, but higher systematic risk, while we also control for endogeneity issues. We show that that it pays to invest in environmental stocks. Robustness analysis, such as counterfactual regressions and panel VAR, confirms our main findings, though it demonstrates some of underlying complexities.

Keywords: Environmental stocks; Portfolio selection; Returns; Risk (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:77:y:2021:i:c:s1057521921001472

DOI: 10.1016/j.irfa.2021.101812

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