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Less is more: The impact of carbon emissions on stock returns

Ansaharju, Sara Alexandra LU (2022) NEKN02 20222
Department of Economics
Abstract
This paper assesses the impact of carbon emissions on European stock returns.
The author aims to find out whether a carbon premium – companies with higher carbon emissions experiencing higher returns – exists as firms need to compensate investors for the risk they are taking. To achieve the goal, fixed effect model is estimated using panel data comprising 600 companies listed in the Euro STOXX 600 index. The period of study is 2006-2021.

To examine the effect of the Paris Agreement, a treaty aiming to decrease greenhouse gas emissions, the regressions are additionally run before and after the introduction of the treaty. The results indicate that during the whole period from 2006 to 2021 as well as after the introduction of the Paris... (More)
This paper assesses the impact of carbon emissions on European stock returns.
The author aims to find out whether a carbon premium – companies with higher carbon emissions experiencing higher returns – exists as firms need to compensate investors for the risk they are taking. To achieve the goal, fixed effect model is estimated using panel data comprising 600 companies listed in the Euro STOXX 600 index. The period of study is 2006-2021.

To examine the effect of the Paris Agreement, a treaty aiming to decrease greenhouse gas emissions, the regressions are additionally run before and after the introduction of the treaty. The results indicate that during the whole period from 2006 to 2021 as well as after the introduction of the Paris Agreement, firms with higher Scope 1 and 3 carbon emissions experienced lower returns, leading to a rejection of the carbon premium hypothesis. In other words, firms with higher carbon emissions do not exhibit higher annual stock returns. (Less)
Please use this url to cite or link to this publication:
author
Ansaharju, Sara Alexandra LU
supervisor
organization
course
NEKN02 20222
year
type
H1 - Master's Degree (One Year)
subject
keywords
Carbon emissions, Responsible investing, Climate Change, Stock performance, Paris Agreement
language
English
id
9110138
date added to LUP
2023-06-19 10:11:45
date last changed
2023-06-19 10:11:45
@misc{9110138,
  abstract     = {{This paper assesses the impact of carbon emissions on European stock returns.
The author aims to find out whether a carbon premium – companies with higher carbon emissions experiencing higher returns – exists as firms need to compensate investors for the risk they are taking. To achieve the goal, fixed effect model is estimated using panel data comprising 600 companies listed in the Euro STOXX 600 index. The period of study is 2006-2021. 

To examine the effect of the Paris Agreement, a treaty aiming to decrease greenhouse gas emissions, the regressions are additionally run before and after the introduction of the treaty. The results indicate that during the whole period from 2006 to 2021 as well as after the introduction of the Paris Agreement, firms with higher Scope 1 and 3 carbon emissions experienced lower returns, leading to a rejection of the carbon premium hypothesis. In other words, firms with higher carbon emissions do not exhibit higher annual stock returns.}},
  author       = {{Ansaharju, Sara Alexandra}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Less is more: The impact of carbon emissions on stock returns}},
  year         = {{2022}},
}