Hedging Climate Change News

Engle, Robert F.; Giglio, Stefano; Lee, Heebum; Kelly, Bryan T.; Stroebel, Johannes

doi:10.2139/ssrn.3422236

Cited by 37 publications

(68 citation statements)

References 9 publications

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“…( 2), α is negative and significant in all models meaning that investors, who neglect the greenness and transparency factor, misprice their investments. This result is in line with Engle et al (2020) and Pastor et al (2021b) showing that the alpha of a climate hedge portfolio would generally be negative.…”

Section: The Greenness and Transparency Factorsupporting

confidence: 87%

“…21 Engle et al (2020) do not distinguish the different types of climate change news accounted for in the sentiment index. Consequently, we are not able to disentangle the relative weight of news related to the low-carbon transition, on the one hand, versus those related to natural disasters, on the other hand.…”

Section: Discussionmentioning

confidence: 98%

“…Indeed, climate risk can affect almost all assets, hence f g,t can be defined as a pervasive factor (see e.g. Pastor et al, 2021b;Engle et al, 2020) 1983). Under no-arbitrage opportunities, the following parameter restriction holds:…”

Section: Conditional Factor Model For Equity Returnsmentioning

confidence: 99%

“…assets trading at below 5 USD, which are mostly illiquid and highly volatile (see, e.g. Chen and Petkova, 2012, Stambaugh et al, 2015and Engle et al, 2020. The final dataset includes T = 176 monthly observations for n = 3, 486 stocks.…”

Section: Conditional Factor Model For Equity Returnsmentioning

confidence: 99%

“…explanatory variables. In order to account for different channels, we test a wide range of variables including fossil fuels, namely coal and oil; all critical minerals for clean energy technologies listed by the World Bank (2020) and the International Energy Agency (2021); market volatility; a marketbased economic sentiment index for the European Union; and the negative climate sentiment index defined inEngle et al (2020), which captures public attention and sentiment towards climate change based on news.19 …”

mentioning

confidence: 99%

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When Do Investors Go Green? Evidence From a Time-Varying Asset-Pricing Model

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Section: The Greenness and Transparency Factorsupporting

confidence: 87%

Section: Discussionmentioning

confidence: 98%

Section: Conditional Factor Model For Equity Returnsmentioning

confidence: 99%

Section: Conditional Factor Model For Equity Returnsmentioning

confidence: 99%

mentioning

confidence: 99%

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When Do Investors Go Green? Evidence From a Time-Varying Asset-Pricing Model

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The level of sustainability and mutual fund performance in Europe: An empirical analysis using ESG ratings

Abate

Basile

Ferrari

2021

Corp Soc Responsibility Env

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Over recent years, investors' attention on the environment, social responsibility, and governance (ESG) has been growing. At the same time, managers, investors, and regulators are interested in ascertaining whether mutual funds that invest in ESG‐compliant assets perform better than those with a low ESG commitment. The sustainability of funds' portfolios can be measured by ESG ratings, a measure of the financially material ESG factors of the securities held by a fund. Our study therefore aims to verify whether funds with high ESG ratings outperform funds with low ESG ratings, considering the risks taken, including higher moments, and costs borne by investors. Our analysis is carried out on a sample of 634 European mutual funds. By using data envelopment analysis, it provides evidence of the superior efficiency of funds investing in high ESG‐rated securities.

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Inside the ESG ratings: (Dis)agreement and performance

Billio

Costola

Hristova

et al. 2021

Corp Soc Responsibility Env

280

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We analyze the ESG rating criteria used by prominent agencies and show that there is a lack of a commonality in the definition of ESG (i) characteristics, (ii) attributes and (iii) standards in defining E, S and G components. We provide evidence that heterogeneity in rating criteria can lead agencies to have opposite opinions on the same evaluated companies and that agreement across those providers is substantially low. Those alternative definitions of ESG also affect sustainable investments leading to the identification of different investment universes and consequently to the creation of different benchmarks. This implies that in the asset management industry it is extremely difficult to measure the ability of a fund manager if financial performances are strongly conditioned by the chosen ESG benchmark. Finally, we find that the disagreement in the scores provided by the rating agencies disperses the effect of preferences of ESG investors on asset prices, to the point that even when there is agreement, it has no impact on financial performances.

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Hedging Climate Change News

Cited by 37 publications

References 9 publications

When Do Investors Go Green? Evidence From a Time-Varying Asset-Pricing Model

When Do Investors Go Green? Evidence From a Time-Varying Asset-Pricing Model

The level of sustainability and mutual fund performance in Europe: An empirical analysis using ESG ratings

Inside the ESG ratings: (Dis)agreement and performance

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