Do investors care about carbon risk?

Patrick Bolton and Marcin Kacperczyk

Journal of Financial Economics, 2021, vol. 142, issue 2, 517-549

Abstract: We study whether carbon emissions affect the cross-section of US stock returns. We find that stocks of firms with higher total carbon dioxide emissions (and changes in emissions) earn higher returns, controlling for size, book-to-market, and other return predictors. 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 (the ratio of total emissions to sales) 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.

Keywords: Carbon emissions; Climate change; Stock returns; Institutional investors (search for similar items in EconPapers)
JEL-codes: D62 G12 G23 G30 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (213)

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Related works:
Working Paper: Do Investors Care about Carbon Risk? (2020)
Working Paper: Do Investors Care about Carbon Risk? (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:142:y:2021:i:2:p:517-549

DOI: 10.1016/j.jfineco.2021.05.008

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