Year: 2024
Type: conference-paper
Abstract: —This research paper delves into the paradoxicaldynamics of sustainable investing, exploringthe contrasting narratives between the aggregate-levelperformance of Green portfolios and firm-level empiricalanalyses. At the aggregate level, Green portfolios,comprising companies with lower carbon emissionsor higher ESG scores, consistently outperform theirBrown counterparts, indicative of a ”green premium”driven by increasing concerns over climate changeand sustainability. However, firm-level empirical datapresents a contradictory picture, suggesting a ”climaterisk premium” where Brown firms, associated withhigher carbon footprints or lower ESG scores, yieldhigher expected stock returns. Through rigorous analysescombining cross-sectional evidence, portfolio performanceassessments, and firm-level investigations, thispaper unveils that under varying assumptions and modelspecifications, firm-level results align with aggregateportfolio analysis. It reveals that Brown firms withhigher carbon footprints are more exposed to climatechange-related risks and tend to underperform Greenfirms during periods of heightened climate concern.These insights contribute to a nuanced understandingof the interplay between sustainability and financialreturns, offering valuable implications for investmentdecisions and sustainable practices in an evolving globallandscape.
Source: HAL
Author: Ramadugu, Ramakrishna
Institution: IEEE Standards Association
Language: French
Subfield: Finance
Domain: Social Sciences
SDG: Climate action
Open Access status: green
OpenAlex ID: W4407346596