Do Investors Really Care about Carbon Risk?

64 Pages Posted: 28 Feb 2023 Last revised: 11 Apr 2023

Date Written: February 1, 2023

Abstract

This research paper is written by Shaojun Zhang (The Ohio State University).

The carbon premium refers to the excess return associated with brown firms and is the focus of several recent influential studies. This paper finds negative excess return associated with carbon intensities, but no excess return associated with total carbon emissions and emission growth in the US. Internationally, the carbon excess return is zero on average and is lower in countries with stronger climate taste shocks during the transition, such as sustainable flows and climate concerns. The inference differs from previous studies because I relate stock returns to lagged carbon measures available to investors instead of contemporaneous measures nonparametrically.

Keywords: carbon emissions, climate change, predictability, stock returns

Suggested Citation

Institute for Monetary and Financial Research, Hong Kong, Do Investors Really Care about Carbon Risk? (February 1, 2023). Hong Kong Institute for Monetary and Financial Research (HKIMR) Research Paper AP No. 1/2023, Available at SSRN: https://ssrn.com/abstract=4372589 or http://dx.doi.org/10.2139/ssrn.4372589

Hong Kong Institute for Monetary and Financial Research (Contact Author)

(HKIMR) ( email )

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