In their indisposed paper, Aswani, Raghunandan, and Rajgopal (ARR) provide a critique of our main findings on the pricing of carbon transition risk in Bolton and Kacperczyk (2021a, 2021b, 2022) and in Bolton, Halem, and Kacperczyk (2022). We take exception to the key elements of their critique....

Companies are exposed to carbon-transition risk as the global economy transitions away from fossil fuels to renewable energy. We estimate the market-based premium associated with this transition risk at the firm level in a cross-section of over 14,400 firms in 77 countries. We find a widespread...