Do Investors Care about Carbon Risk?

Marcin Kacperczyk and Patrick Bolton

No 14568, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper explores whether carbon emissions affect the cross-section of U.S. stock returns. We find that stocks of firms with higher total CO2 emissions (and changes in emissions) earn higher returns, after controlling for size, book-to-market, momentum, and other factors that predict returns. 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 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: 2020-04
New Economics Papers: this item is included in nep-ene and nep-env
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (58)

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Related works:
Journal Article: Do investors care about carbon risk? (2021)
Working Paper: Do Investors Care about Carbon Risk? (2020)
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