Decarbonizing Institutional Investor Portfolios: Helping to Green the Planet or Just Greening Your Portfolio?

75 Pages Posted: 20 Sep 2022 Last revised: 29 Sep 2023

See all articles by Vaska Atta-Darkua

Vaska Atta-Darkua

University of Virginia, Darden School of Business

Simon Glossner

Board of Governors of the Federal Reserve System

Philipp Krueger

University of Geneva - Geneva Finance Research Institute (GFRI); Swiss Finance Institute; European Corporate Governance Institute (ECGI); University of Geneva - Geneva School of Economics and Management

Pedro Matos

University of Virginia - Darden School of Business; European Corporate Governance Institute (ECGI)

Date Written: September 28, 2023

Abstract

We study how institutional investors that join climate-related investor initiatives decarbonize their equity portfolios. Decarbonization can be achieved either by re-weighting portfolios towards lower carbon emitting firms or alternatively via targeted engagements with portfolio companies to reduce their emissions. Our findings indicate that portfolio re-weighting is the predominant greening strategy by climate-conscious investors, in particular by those based in countries with carbon emissions pricing schemes. We do not uncover much evidence of engagement even after the 2015 Paris Agreement. Furthermore, we find no evidence that climate-conscious investors allocate capital towards firms developing climate patents, but they do re-weight towards firms starting to generate green revenues. Overall, our analysis raises doubts about the effectiveness of investor-led initiatives in reducing corporate emissions and helping an all-economy transition to “green the planet”.

Keywords: climate change, decarbonization, GHG emissions, sustainability, institutional investors, CDP, Climate Disclosure Project, Climate Action 100+

JEL Classification: G15, G23, G30, M14

Suggested Citation

Atta-Darkua, Vaska and Glossner, Simon and Krueger, Philipp and Matos, Pedro, Decarbonizing Institutional Investor Portfolios: Helping to Green the Planet or Just Greening Your Portfolio? (September 28, 2023). Available at SSRN: https://ssrn.com/abstract=4212568 or http://dx.doi.org/10.2139/ssrn.4212568

Vaska Atta-Darkua

University of Virginia, Darden School of Business ( email )

100 Darden Blvd
Charlottesville, VA VA 22903
United States

Simon Glossner

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Philipp Krueger

University of Geneva - Geneva Finance Research Institute (GFRI) ( email )

40 Boulevard du Pont d'Arve
Geneva 4, Geneva 1211
Switzerland

Swiss Finance Institute ( email )

Switzerland

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

University of Geneva - Geneva School of Economics and Management ( email )

Uni Mail
Bd du Pont-d'Arve 40
Geneva, 1211
Switzerland

Pedro Matos (Contact Author)

University of Virginia - Darden School of Business ( email )

University of Virginia
P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434 243 8998 (Phone)
434 924 0726 (Fax)

HOME PAGE: http://www.darden.virginia.edu/faculty-research/directory/pedro-matos/

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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