Carbon Home Bias of European Investors

59 Pages Posted: 11 Jul 2023

See all articles by Martijn Adriaan Boermans

Martijn Adriaan Boermans

De Nederlandsche Bank

Rients Galema

Utrecht University - School of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: July 11, 2023


We investigate the extent to which investors exhibit carbon home bias: disproportionate investment in carbon-intensive firms from the home market. We utilize a comprehensive stock-level holdings dataset of European investors to understand the relationship between carbon home bias, divestment and disclosure. We show that investors exhibit significant carbon home bias, with about half of their carbon emissions stemming from their domestic portfolios. Over our sample period 2013-2022, European investors have decarbonized their portfolios, but predominantly through their foreign portfolios. Domestic carbon exposures have persisted. Differences-in-differences analyses show that a shock inducing institutional investors to decarbonize is associated with higher ownership of domestic carbon-intensive stocks. Consistent with engagement, higher domestic ownership of carbon-intensive stocks is associated with lower carbon emissions and a higher likelihood of carbon disclosure. Our results show that carbon home bias is not driven by differential home-foreign carbon risk premia, but instead suggest investors’ successful engagement at home while divesting abroad.

Keywords: home bias, carbon footprint, divestment, engagement, securities holdings statistics.omma separated]

JEL Classification: G11, G15, G23, H55, Q54, Q56.

Suggested Citation

Boermans, Martijn Adriaan and Galema, Rients, Carbon Home Bias of European Investors (July 11, 2023). De Nederlandsche Bank Working Paper No. 786, Available at SSRN: or

Martijn Adriaan Boermans (Contact Author)

De Nederlandsche Bank ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB

Rients Galema

Utrecht University - School of Economics ( email )

Kriekenpitplein 21-22
Adam Smith Building
Utrecht, +31 30 253 7373 3584 EC

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