Year: 2025
Type: article
Abstract: We examine whether mutual fund managers overestimate carbon risk when they are exposed to local air pollution. We find that air pollution near fund managers induces them to underweight stocks of high-emission firms. The effects strengthen among environmentally conscious fund managers and among those likely to be surprised by air pollution—consistent with the idea that managers revise their beliefs about carbon risk following exposure to air pollution. A firm’s carbon-emissions disclosures and fund managers’ sophistication moderate these effects. Carbon-intensive stocks sold by fund managers who are exposed to local air pollution subsequently outperform stocks they buy, suggesting that such underweighting is costly to fund investors.
Source: Review of Accounting Studies
Authors: Thanh D. Huynh, Frank Weikai Li, Ying Xia
Institutions: Monash University, Singapore Management University
Language: English
Subfield: Finance
Domain: Social Sciences
SDG: Climate action
Open Access status: hybrid
Estimated APC paid: $3,190
OpenAlex ID: W4407831124