The Illusion of the Carbon Premium

Robeco

Research

36 Pages

Using only carbon emissions data available to investors at the time of portfolio formation, the authors find no positive relation between firms’ absolute carbon emissions and stock returns.

Key Takeaways

Carbon Premium: The reported carbon premium is therefore driven by a look-ahead bias, as estimated emissions are mechanically linked to future revenues when emissions data are not sufficiently lagged.
Green v Brown: When greenness is measured by carbon intensity rather than absolute emissions, green firms have outperformed brown firms.
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