Carbon tax ruins investor confidence – they see quick transition as too risky
Matthias Apel et al, 23. Matthias Apel is a quantitative analyst in quantum optics at the Max-Planck-Institute. André Betzer is a Professor of Finance and Corporate Governance, BUW - Schumpeter School of Business and Economics. Scherer is Director of Haus der Kulturen der Welt since 2006. He holds a Ph.D. in Philosophy from the Universität des Saarlandes, Saarbrücken. “Real-time transition risk.” Finance Research Letters 53 (2023) 103600. https://doi.org/10.1016/j.frl.2022.103600
We develop a point-in-time index to approximate changes in transition risk from climate-related news events. By explicitly considering news to signal an increase or a decrease in the external pressure towards a shift to a lower-carbon economy, we overcome the assumption that “no news is good news on climate” inherent in previous research. We evaluate the return sensitivity of publicly available climate portfolios that apply different approaches to measure a firm’s environmental performance based on investors’ objectives. Our results show that short-term transition risk tends to affect returns of stock portfolios based on firms’ business activity but not emissions.