Net-Zero Transition and Divestments of Carbon-Intensive Assets

Alperen Gözlügöl, Wolf-Georg Ringe

2023 | Academic | Divestment, Net-Zero, Portfolio Construction

Divestments of brown assets have proven to be an attractive option to achieve those goals and are actively used by some carbon majors. However, the economics of mergers and acquisitions of carbon-intensive assets suggests that in the equilibrium, those assets will be valued more by firms and investors that expect to fully exploit them due to differences of opinion and tastes/preferences and/or due to different ecosystems they find themselves in regarding the pressure to decarbonize.