This paper analyzes the approaches adopted by institutional investors to manage climate risk in their portfolios and proposes policies to increase climate awareness in this large segment of the capital markets. Because of their size and their role as conduit of savers' climate concerns to the...

We use a deep learning model to extract syntax and context information from mutual fund managers' narrative discussions and measure their risk assessment. We validate the forward-looking nature of the risk measure by showing that more negative (positive) risk assessment in managers' narratives...

Drawing on a survey amongst IADI Members, this IADI Survey Brief takes stock of the incorporation of climate related issues in fund management by deposit insurers. It provides a snapshot of current deposit insurer practices, identifies deposit insurers’ expectations, and explores possibilities...

Within the European financial sector, investment funds are more exposed to climate-sensitive economic sectors than banks, insurers and pension funds. However, few investment fund climate-related financial risk assessments have been conducted. We attempt to help fill this gap, using a dataset of...

Portfolio management is confronted with climate change – stronger and more rapidly than expected. Risks arising from the transition process from a brown, carbon-based to a green, low-carbon economy need to be integrated into portfolio and risk management. We show how to quantify these carbon...

This article studies the impact of carbon risk on stock pricing. To address this, we consider the seminal approach of Görgen et al. (2019), who proposed estimating the carbon financial risk of equities by their carbon beta. To achieve this, the primary task is to develop a brown-minus-green (or...

In response to Morningstar’s release of carbon risk (CR) scores in May 2018, (environmentally) sustainable mutual funds in the U.S. showed a greater reduction in their portfolio CR relative to conventional funds. The observed causal impact of this third-party disclosure is consistent with the...

In the presence of rising concern about climate change that potentially affects risk and return of investors’ portfolio companies, active investors might have dispersed climate risk exposures. We compute mutual fund covariance with market-wide climate change news index and find that high...

We study how investor's persistent preference to invest more in the home market — “home bias” — is affecting investor's efforts to mitigate risks associated with climate change. When investors have a tendency to tilt their portfolio towards domestic assets, the carbon intensity in the...

Transitioning to a low-carbon economy to mitigate the effects of climate change involves risks. We investigate the effects of managerial ownership and management on the low-carbon transition risk of mutual fund portfolios and the effects of low-carbon transition risk on mutual fund performance...