Carbon Risk

ArXiv ID: ssrn-2930897 “View on arXiv”

Authors: Unknown

Abstract

We investigate carbon risk in global equity prices. We develop a measure of carbon risk using industry standard databases and study return differences between b

Keywords: carbon risk, climate finance, ESG investing, portfolio pricing, equities

Complexity vs Empirical Score

• Math Complexity: 4.0/10
• Empirical Rigor: 6.5/10
• Quadrant: Street Traders
• Why: The paper uses standard asset pricing regressions and portfolio sorts but lacks heavy mathematical derivations; however, it demonstrates strong empirical rigor through the use of multiple industry-standard ESG databases, a constructed factor-mimicking portfolio (BMG), and extensive backtesting across regions and time periods.

  flowchart TD
    A["Research Goal<br>How does carbon risk affect<br>global equity returns?"] --> B["Data Collection<br>Refinitiv ESG, CRSP, Compustat"]
    B --> C["Methodology<br>Portfolio Formation &<br>Regression Analysis"]
    C --> D["Computation<br>Carbon Risk Score &<br>Alpha Calculation"]
    D --> E["Key Finding 1<br>High-carbon firms earn<br>significant positive returns"]
    D --> F["Key Finding 2<br>Carbon risk is priced<br>in global markets"]