Price of Long-Run Temperature Shifts in Capital Markets

Ravi Bansal, Dana Kiku, Marcelo Ochoa

2016 | Academic | Climate, Risk & Performance

We find that global warming carries a positive risk premium that increases with the level of temperature and that has almost doubled over the last 80 years. Consistent with our model, virtually all US equity portfolios have negative exposure (beta) to long-run temperature fluctuations.