Decarbonizing Institutional Investor Portfolios

59 Pages Posted: 20 Sep 2022

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 7, 2022

Abstract

Combining global data on institutional investors’ equity holdings and firm-level carbon emissions, we study how climate-conscious institutions reduced the carbon emissions of their equity portfolios between 2005 and 2019. We hypothesize that institutions could either decarbonize via tilting their holdings towards lower emitting firms or via engaging their portfolio firms to curb emissions. Our analysis suggests that tilting is the predominant strategy used by climate-conscious institutions but also uncover some early evidence of longer-term engagement with the top emitting firms following the 2015 Paris Agreement. We also find limited evidence of other portfolio measures of energy transition in terms of green patents and firm revenues. Overall, our analysis raises some doubts about the effectiveness of investor-led initiatives in reducing corporate carbon emissions and taking necessary action on climate change.

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 (September 7, 2022). 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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