Global Pricing of Carbon-Transition Risk |
| |
| Authors: | PATRICK BOLTON MARCIN KACPERCZYK |
| |
| Institution: | 1. Patrick Bolton is with Columbia University;2. Imperial College;3. CEPR;4. and NBER. Marcin Kacperczyk is with Imperial College and CEPR. We thank Lucian Bebchuk;5. John Cochrane;6. Harrison Hong;7. Paul Hsu;8. Louis Kaplow;9. Paymon Khorrami;10. Christian Leuz;11. Pedro Matos;12. Stefan Nagel (the editor);13. Kunal Sachdeva;14. Zacharias Sautner;15. two referees;16. and the associate editor for many helpful suggestions. We are also grateful to seminar participants at the Bank for International Settlements, Bank of England, Bank of Italy, Bank of Japan, Blackrock, Danmarks Nationalbank Climate Conference, Florida State University, Harvard Law School, HEC Montreal, Imperial College, INSEAD, Mayo Finance Seminar, McGill, NBER LTAM Meetings, NBIM, Rice University, University of Alberta, University of Cyprus, University of Geneva Climate Conference, University of Miami, UNPRI, Virtual Seminar on Climate Economics, and the World Bank for their comments. We are grateful to Trucost for giving us access to their corporate carbon emissions data, and to Adrian Lam and Jingyu Zhang for their very helpful research assistance. Some of the ideas in this paper have been reported in the working draft, “Carbon Premium around the World.” This project has received funding from the European Research Council (ERC) under the ERC Advanced Grant program (grant agreement No. 885552 Investors and Climate Change). We have read The Journal of Finance's disclosure policy and have no conflicts of interest to disclose. |
| |
| Abstract: | The energy transition away from fossil fuels exposes companies to carbon-transition risk. Estimating the market-based premium associated with carbon-transition risk in a cross section of 14,400 firms in 77 countries, we find higher stock returns associated with higher levels and growth rates of carbon emissions in all sectors and most countries. Carbon premia related to emissions growth are greater for firms located in countries with lower economic development, larger energy sectors, and less inclusive political systems. Premia related to emission levels are higher in countries with stricter domestic climate policies. The latter have increased with investor awareness about climate change risk. |
| |
| Keywords: | |
|
|
