Carbon Risk Premium and Worries about Climate Change

41 Pages Posted: 18 Oct 2021 Last revised: 30 Nov 2023

See all articles by Angelo Moretti

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

Moretti, Angelo and Santi, Caterina, Carbon Risk Premium and Worries about Climate Change (October 14, 2021). Available at SSRN: https://ssrn.com/abstract=3942738 or http://dx.doi.org/10.2139/ssrn.3942738

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/

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
361
Abstract Views
1,438
Rank
170,890
PlumX Metrics