- 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.
compensation for their exposure to carbon emission risk.