Get green or die trying? Carbon risk integration into portfolio management.

Item Type Journal paper

Portfolio management is confronting climate change more strongly and rapidly than expected. Risks arising from the transition from a brown, carbon-based to a green, low-carbon economy need to be integrated into portfolio and risk management. The authors show how to quantify these carbon risks by using a capital markets–based approach. Their measure of carbon risk, the carbon beta, can serve as an integral part of portfolio management practices in a more comprehensive way than fundamental carbon risk measures. Apart from other studies, the authors demonstrate that both green and brown stocks are risky per se, but there is no adequate remuneration in the financial market. In addition, carbon risk exposure is correlated with exposures to other common risk factors. This requires due diligence when integrating carbon risk in investment practices. By implementing carbon risk screening and best-in-class approaches, the authors find that investors can gain a desired level of carbon risk exposure, but this does not come without well-hidden costs.

Authors Nerlinger, Martin; Jacob, Andrea & Görgen, Maximilian
Journal or Publication Title Journal of Portfolio Management
Language English
Subjects finance
HSG Classification contribution to scientific community
Refereed Yes
Date 2021
Publisher Pageant Media Ltd
Volume 47
Number 3
Page Range 77-93
ISSN 0095-4918
ISSN-Digital 2168-8656
Publisher DOI
Official URL
Depositing User Prof. Ph.D Martin Nerlinger
Date Deposited 26 Jul 2021 15:32
Last Modified 26 Jul 2021 15:32


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Nerlinger, Martin; Jacob, Andrea & Görgen, Maximilian (2021) Get green or die trying? Carbon risk integration into portfolio management. Journal of Portfolio Management, 47 (3). 77-93. ISSN 0095-4918

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