Carbon Risk Premium and Worries about Climate Change
41 Pages Posted: 18 Oct 2021 Last revised: 30 Nov 2023
Angelo Moretti
Utrecht University - Faculty of Social and Behavioural Sciences
Caterina Santi
University of Liège - HEC Liège, Management School of the Univerisity of Liège
Date Written: October 14, 2021
Abstract
This paper sheds light on the impact of investor worries about climate change on the pricing of emission (carbon-intensive) and clean (low-emission) stocks. We estimate the carbon risk premium in a cross-section of over 4,800 firms in 21 countries. We do not find evidence of a carbon risk premium when investor worries about climate change are low. Moreover, the carbon premium is significant for mediumhigh quantiles of the return distribution when investors' worries are high. Overall, our results are consistent with an interpretation that non-worried investors are not demanding compensation for their exposure to carbon emission risk.
Keywords: Public Attitudes, Climate Finance, Asset Pricing, Europe JEL classification: C21, C83, G10, G12, Q54
JEL Classification: C21, C83, G10, G12, Q54.
Suggested Citation: Suggested Citation
Angelo Moretti
Utrecht University - Faculty of Social and Behavioural Sciences ( email )
Heidelberglaan 8
Utrecht, 3584
Netherlands
Caterina Santi (Contact Author)
University of Liège - HEC Liège, Management School of the Univerisity of Liège ( email )
rue Louvrex 14
Liège, 4000
Belgium
HOME PAGE: http://https://www.caterinasanti.com/
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