Author: Alexander Cheema-Fox
, CFA, Bridget Realmuto LaPerla
, George Serafeim
, David Turkington
, CFA and Hui (Stacie) Wang
, CFA
Summary:
We analyze how the use of different climate risk measures leads to different portfolio carbon outcomes and risk-adjusted returns. Our findings are synthesized in a rules-based investment framework, which selects a different type of climate metric across industries and weighs industries in the portfolio based on the variability of carbon outcomes among firms within each industry. We conclude that analyzing the merits and applicability of various climate data can help investors manage climate risk while increasing risk-adjusted returns.
