Carbon Risk

59 Pages Posted: 10 Mar 2017 Last revised: 14 Jul 2018

Maximilian Görgen

University of Augsburg

Andrea Jacob

University of Augsburg

Martin Nerlinger

University of Augsburg

Ryan Riordan

Smith School of Business

Martin Rohleder

University of Augsburg

Marco Wilkens

University of Augsburg

Date Written: June 29, 2018

Abstract

The climate change induced transition of the economy bears existential risk for firms: carbon risk. Based on a unique sample of 1,600 global firms with comprehensive carbon risk proxies from four major ESG databases, we construct a carbon risk factor from stock returns of brown and green firms. This factor can be used in established factor models to estimate Carbon Beta as a straightforward measure for carbon risk absent any firm specific carbon risk information. Estimating Carbon Betas for more than 39,000 firms, we report the carbon risk of portfolios, industries, and countries. Our results can be used by firms to understand their own carbon risk, by regulators to gauge the impact of policy changes, and by investors to directly manage carbon risk in their portfolios without hurting performance.

Keywords: Carbon risk, climate finance, economic transition, climate change, asset pricing

JEL Classification: G12, G15, Q51, Q54

Suggested Citation

Görgen, Maximilian and Jacob, Andrea and Nerlinger, Martin and Riordan, Ryan and Rohleder, Martin and Wilkens, Marco, Carbon Risk (June 29, 2018). Available at SSRN: https://ssrn.com/abstract=2930897 or http://dx.doi.org/10.2139/ssrn.2930897

Maximilian Görgen

University of Augsburg ( email )

Universitätsstr. 2
Augsburg, 86159
Germany

Andrea Jacob

University of Augsburg ( email )

Universitätsstr. 2
Augsburg, 86159
Germany

Martin Nerlinger

University of Augsburg ( email )

Universitätsstr. 2
Augsburg, 86159
Germany

Ryan Riordan

Smith School of Business ( email )

Smith School of Business, Queen's University
143 Union Street
Kingston, Ontario K7L 3N6
Canada

Martin Rohleder

University of Augsburg ( email )

Universitaetsstr. 16
Augsburg, 86159
Germany
+49 821 598 4120 (Phone)

Marco Wilkens (Contact Author)

University of Augsburg ( email )

Universitaetsstr. 16
Augsburg, 86159
Germany
+49 821 598 4124 (Phone)
+49 821 598 4223 (Fax)

HOME PAGE: http://www.wiwi.uni-augsburg.de/bwl/wilkens/team/wilkens_marco/

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