Skip to main content

Main menu

  • Home
  • Current Issue
  • Past Issues
  • Videos
  • Submit an article
  • More
    • About JPM
    • Awards
    • Editorial Board
    • Published Ahead of Print (PAP)
  • IPR Logo
  • About Us
  • Journals
  • Publish
  • Advertise
  • Videos
  • Webinars
  • More
    • Awards
    • Article Licensing
    • Academic Use
  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter

User menu

  • Sample our Content
  • Request a Demo
  • Log in

Search

  • ADVANCED SEARCH: Discover more content by journal, author or time frame
The Journal of Portfolio Management
  • IPR Logo
  • About Us
  • Journals
  • Publish
  • Advertise
  • Videos
  • Webinars
  • More
    • Awards
    • Article Licensing
    • Academic Use
  • Sample our Content
  • Request a Demo
  • Log in
The Journal of Portfolio Management

The Journal of Portfolio Management

ADVANCED SEARCH: Discover more content by journal, author or time frame

  • Home
  • Current Issue
  • Past Issues
  • Videos
  • Submit an article
  • More
    • About JPM
    • Awards
    • Editorial Board
    • Published Ahead of Print (PAP)
  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter

Foundations of Climate Investing: How Equity Markets Have Priced Climate-Transition Risks

Guido Giese, Zoltán Nagy and Bruno Rauis
The Journal of Portfolio Management Novel Risks 2021, 47 (9) 35-53; DOI: https://doi.org/10.3905/jpm.2021.1.283
Guido Giese
is an executive director at MSCI in London, UK
  • Find this author on Google Scholar
  • Find this author on PubMed
  • Search for this author on this site
Zoltán Nagy
is an executive director at MSCI in Budapest, Hungary
  • Find this author on Google Scholar
  • Find this author on PubMed
  • Search for this author on this site
Bruno Rauis
is an executive director at MSCI in London, UK
  • Find this author on Google Scholar
  • Find this author on PubMed
  • Search for this author on this site
  • Article
  • Info & Metrics
  • PDF (Subscribers Only)
Loading

Click to login and read the full article.

Don’t have access? Click here to request a demo 
Alternatively, Call a member of the team to discuss membership options
US and Overseas: +1 646-931-9045
EMEA: +44 0207 139 1600

Abstract

Countries have set varying targets to reduce greenhouse gas emissions in line with the Paris Agreement’s goal of keeping the increase in global average temperatures to well below 2°C. In this article, the authors examine to what extent climate risk has been priced into equity markets and whether climate change can be modeled using a typical risk model structure. They develop the fundamental economic transmission channels to explain the potential impact of climate change on equity prices, including empirical evidence for climate policies and green technology as financial risk drivers. They also study the impact of climate-transition risk on valuation levels and trends. They conclude with a discussion of how to measure and categorize companies’ climate-risk exposures and how to integrate climate-transition risks into risk models.

TOPICS: ESG investing, security analysis and valuation, tail risks

Key Findings

  • ▪ The authors identified economic transmission channels showing how regulatory policies and green technology influence financial markets. In developed markets outside the United States, more carbon-efficient companies experienced stronger performance over a seven-year study period. They found companies’ green revenue share was clearly associated with higher earnings growth and relatively better stock performance within a given sector.

  • ▪ Next, they looked at the relationship between companies’ climate-transition risk profiles and their valuation levels, finding that carbon-intensive companies experienced declining valuation in terms of price-to-book ratios than their less carbon-intensive sector peers—suggesting that markets have discounted the book value of carbon-intensive companies during the study period. In contrast, companies with significant green revenues saw their price-to-earnings ratios increase relative to their sector peers.

  • ▪ Companies’ earnings growth and stock performance was directly related to their greenhouse gas emissions. Using five MSCI low carbon transition categories, the authors found that the riskiest category (stranded assets) had the weakest performance and the solutions category the strongest during the study period. Although most performance differences were explained by the industry factor, there was a significant stock-specific return that showed a strong correlation to companies’ climate transition-risk profile.

  • © 2021 Pageant Media Ltd
View Full Text

Don’t have access? Click here to request a demo

Alternatively, Call a member of the team to discuss membership options

US and Overseas: +1 646-931-9045

UK: 0207 139 1600

Log in using your username and password

Forgot your user name or password?
PreviousNext
Back to top

Explore our content to discover more relevant research

  • By topic
  • Across journals
  • From the experts
  • Monthly highlights
  • Special collections

In this issue

The Journal of Portfolio Management: 47 (9)
The Journal of Portfolio Management
Vol. 47, Issue 9
Novel Risks 2021
  • Table of Contents
  • Index by author
  • Complete Issue (PDF)
Print
Download PDF
Article Alerts
Sign In to Email Alerts with your Email Address
Email Article

Thank you for your interest in spreading the word on The Journal of Portfolio Management.

NOTE: We only request your email address so that the person you are recommending the page to knows that you wanted them to see it, and that it is not junk mail. We do not capture any email address.

Enter multiple addresses on separate lines or separate them with commas.
Foundations of Climate Investing: How Equity Markets Have Priced Climate-Transition Risks
(Your Name) has sent you a message from The Journal of Portfolio Management
(Your Name) thought you would like to see the The Journal of Portfolio Management web site.
CAPTCHA
This question is for testing whether or not you are a human visitor and to prevent automated spam submissions.
Citation Tools
Foundations of Climate Investing: How Equity Markets Have Priced Climate-Transition Risks
Guido Giese, Zoltán Nagy, Bruno Rauis
The Journal of Portfolio Management Sep 2021, 47 (9) 35-53; DOI: 10.3905/jpm.2021.1.283

Citation Manager Formats

  • BibTeX
  • Bookends
  • EasyBib
  • EndNote (tagged)
  • EndNote 8 (xml)
  • Medlars
  • Mendeley
  • Papers
  • RefWorks Tagged
  • Ref Manager
  • RIS
  • Zotero
Save To My Folders
Share
Foundations of Climate Investing: How Equity Markets Have Priced Climate-Transition Risks
Guido Giese, Zoltán Nagy, Bruno Rauis
The Journal of Portfolio Management Sep 2021, 47 (9) 35-53; DOI: 10.3905/jpm.2021.1.283
Reddit logo Twitter logo Facebook logo LinkedIn logo Mendeley logo
Tweet Widget Facebook Like LinkedIn logo

Jump to section

  • Article
    • Abstract
    • DATA AND METHODOLOGY
    • DRIVERS AND TRANSMISSION CHANNELS OF TRANSITION RISK
    • VALUATION EFFECTS OF CLIMATE TRANSITION
    • MODELING AND MEASURING FINANCIAL TRANSITION RISK
    • CONCLUSION
    • ENDNOTES
    • REFERENCES
  • Info & Metrics
  • PDF (Subscribers Only)
  • PDF (Subscribers Only)

Similar Articles

Cited By...

  • No citing articles found.
  • Google Scholar
LONDON
One London Wall, London, EC2Y 5EA
United Kingdom
+44 207 139 1600
 
NEW YORK
41 Madison Avenue, New York, NY 10010
USA
+1 646 931 9045
reply@pm.research.com
 

Stay Connected

  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter

MORE FROM PMR

  • News
  • Awards
  • Investment Guides
  • Videos
  • About PMR

INFORMATION FOR

  • Academics
  • Agents
  • Authors
  • Content Usage Terms

GET INVOLVED

  • Advertise
  • Publish
  • Article Licensing
  • Contact Us
  • Subscribe Now
  • Sign In
  • Update your profile
  • Give us your feedback

© 2023 With Intelligence Ltd | All Rights Reserved | ISSN: 0095-4918 | E-ISSN: 2168-8656

  • Site Map
  • Terms & Conditions
  • Privacy Policy
  • Cookies