Global Pricing of Carbon‐Transition Risk

2023/08/12 by Patrick Bolton, PATRICK BOLTON, MARCIN KACPERCZYK +1 · 4 citations
Economics, Econometrics and Finance · #Climate Change Policy and Economics #Financial Markets and Investment Strategies #Market Dynamics and Volatility

paper · pdf · doi:10.1111/jofi.13272

openalex publication_date 2023/08/12 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/31

Abstract

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.

Citations

• The Effect of Green Investment on Corporate Behavior
• Firm-Value Effects of Carbon Emissions and Carbon Disclosures

Cited by

• Climate change-related regulatory risks and bank lending
• Where is the carbon premium? Global performance of green and brown stocks
• Green Window Dressing
• Firm‐Level Climate Change Exposure
• The impact of political risks on carbon emissions
• Do investors care about biodiversity?

Related

• A Run on Fossil Fuel? Climate Change and Transition Risk
• Carbon Tail Risk
• Single Event Transition Risk: A Measure for Long Term Carbon Exposure
• Measuring and Managing Carbon Risk in Investment Portfolios
• Combined climate stress testing of supply-chain networks and the financial system with nation-wide firm-level emission estimates