Do Investors Care about Carbon Risk?

Do Investors Care about Carbon Risk?

Patrick Bolton, Marcin Kacperczyk

Series number :

Serial Number: 

Date posted :

November 19 2020

Last revised :

November 19 2020
SSRN Share


  • Carbon Emissions • 
  • climate change • 
  • stock returns • 
  • institutional investors

We study whether carbon emissions affect the cross-section of U.S. stock returns. We find that stocks of firms with higher total CO2 emissions (and changes in emissions) earn higher returns, controlling for size, book-to-market, and other return predictors. We cannot explain this carbon premium through differences in unexpected profitability or other known risk factors.

We also find that institutional investors implement exclusionary screening based on direct emission intensity (the ratio of total emissions to sales) in a few salient industries. Overall, our results are consistent with an interpretation that investors are already demanding compensation for their exposure to carbon emission risk.

Published in

Published in: 
Publication Title: 
Journal of Financial Economics (JFE) forthcoming


Real name:
Marcin Kacperczyk