Do Investors Care about Carbon Risk?
Open accessAbstract
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.
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- Authors
- Bolton, P., & Kacperczyk, M. T.
- Affiliations
- Center for Economic and Policy Research (US)
- Corresponding author
- Kacperczyk, Marcin T.
- Venue
- SSRN Electronic Journal
- Publisher
- Elsevier BV
- Published
- 2019
- Volume
- 142
- Issue
- 2
- Pages
- 517-549
- ISSN
- 0304-405X (ISSN-L)
- 1556-5068
- OpenAlex
- W3123217383
- Cited by
- 3,380
- References
- 0
- Citations by year
- 2026: 927 · 2025: 881 · 2024: 620 · 2023: 452 · 2022: 289 · 2021: 118 · 2020: 58 · 2019: 24 · 2018: 8 · 2017: 1 · 2016: 1 · 2014: 1
- FWCI
- 148.07
- Type
- journal article
- Language
- en
- Open access
- green
- doi.org
- Locations
- Journal of Financial Economics (publishedVersion)
- SSRN Electronic Journal (publishedVersion)
- National Bureau of Economic Research (publishedVersion, cc-by)
- RePEc: Research Papers in Economics (submittedVersion)
- Spiral (Imperial College London) (submittedVersion, cc-by-nc-nd)
- Funders
- European Commission
- H2020 European Research Council (885552)
- Topics
- Social Sciences › Economics, Econometrics and Finance › Finance › Sustainable Finance and Green Bonds
- Social Sciences › Economics, Econometrics and Finance › Finance › Financial Markets and Investment Strategies
- Social Sciences › Business, Management and Accounting › Strategy and Management › Corporate Social Responsibility Reporting
- Keywords
- CO2 emissions, carbon risk, stock returns, carbon premium, institutional investors, ESG screening, emission intensity, cross-section of stock returns, climate risk pricing
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