Finance and Accounting Research Seminar with Professor Philipp Krueger

Title:

Decarbonizing Institutional Investor Portfolios: Helping to Green the Planet or Just Greening Your Portfolio?

Abstract:

We study how institutional investors that join climate-related investor initiatives decarbonize their

equity portfolios. Decarbonization can be achieved either by re-weighting portfolios towards lower
carbon emitting firms or alternatively via targeted engagements with portfolio companies to reduce their
emissions. Our findings indicate that portfolio re-weighting is the predominant greening strategy by
climate-conscious investors, in particular by those based in countries with carbon emissions pricing
schemes. We do not uncover much evidence of engagement even after the 2015 Paris Agreement.
Furthermore, we find no evidence that climate-conscious investors allocate capital towards firms
developing climate patents, but they do re-weight towards firms starting to generate green revenues.
Overall, our analysis raises doubts about the effectiveness of investor-led initiatives in reducing
corporate emissions and helping an all-economy transition to “green the planet”.