Are Carbon Emissions Associated with Stock Returns?

Jitendra Aswani, Aneesh Raghunandan, Shivaram Rajgopal

2023 | Academic | Climate, Risk & Performance

In sum, this paper shows that the relation between carbon emissions and stock returns or firm value documented in past papers is driven by two main factors: (i) carbon emissions data vendors’ estimation procedures, and (ii) a research design choice made in several prior studies to emphasize unscaled emissions, which are mechanically correlated with productivity and size. Researchers, practitioners and policymakers might want to be careful about interpreting statistical associations between carbon emissions and returns.