Global Pricing of Carbon-Transition Risk

78 Pages Posted: 13 Mar 2020 Last revised: 5 Aug 2022

See all articles by Patrick Bolton

Patrick Bolton

Imperial College London; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Marcin T. Kacperczyk

Imperial College London - Accounting, Finance, and Macroeconomics; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 3 versions of this paper

Date Written: August 5, 2022

Abstract

The energy transition away from fossil fuels exposes companies to carbon-transition risk. Estimating the market-based premium associated with carbon-transition risk in a cross-section of 14,400 firms in 77 countries, we find higher stock returns associated with higher levels and growth rates of carbon emissions in all sectors and most countries. Carbon premia related to emissions growth are greater for firms located in countries with lower economic development, larger energy sectors, and less inclusive political systems. Premia related to emission levels are higher in countries with stricter domestic climate policies. The latter have increased with investor awareness about climate change risk.

Keywords: Carbon Emissions, Carbon-Transition Risk, Climate Change, Stock Returns

JEL Classification: G12, G23, G30, D62

Suggested Citation

Bolton, Patrick and Kacperczyk, Marcin T., Global Pricing of Carbon-Transition Risk (August 5, 2022). Journal of Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3550233 or http://dx.doi.org/10.2139/ssrn.3550233

Patrick Bolton

Imperial College London ( email )

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Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

European Corporate Governance Institute (ECGI)

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Belgium

HOME PAGE: http://www.ecgi.org

Marcin T. Kacperczyk (Contact Author)

Imperial College London - Accounting, Finance, and Macroeconomics ( email )

South Kensington campus
London SW7 2AZ
United Kingdom

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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