Climate sensitivity and mutual fund performance
- 5 May 2021
- preprint
- Published by Elsevier BV in SSRN Electronic Journal
Abstract
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 climate change news index and find that high (positive) climate beta funds outperform low (negative) climate beta funds by 0.24% per month on a risk-adjusted basis. High climate beta mutual funds tilt their holdings towards stocks with high potential to hedge against climate risk. Such stocks yield higher expected returns in the cross section, which are driven by stronger demand and better financial performance over our sample period.This publication has 20 references indexed in Scilit:
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