This paper outlines a simple and robust methodology for portfolio managers to align their portfolios with the carbon neutrality goals (Net Zero Targets) set out following the Paris Agreement in 2015. The approach is based on dynamically limiting the portfolio carbon footprint so that it...

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....

We estimate effects of voluntary and mandatory disclosure of carbon emissions on stock returns, volatility, and turnover. We find that voluntary disclosure of scope 1 emissions by companies results in lower stock returns relative to non-disclosing companies. However, a cost of disclosing...

This paper provides new evidence showing that carbon transition risk is becoming increasingly material and is priced both in equity and debt markets. We find that there is a widespread price-earnings discount linked to corporate carbon emissions. This discount varies, however, by sector and...