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

UNIVERSITY OF TECHNOLOGY SYDNEY
Finance Department
Research Seminars in Finance

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

Speaker: Pedro Matos, University of Virginia

Time and Date: 12 – 1 pm, Wednesday 31 May 2023 (AEST)

Venue: Face-to-face seminar in room CB08.08.02, Level 8, Building 8, University of Technology Sydney, 14-28 Ultimo Rd, Ultimo, Sydney, Australia (Map of campus)

Abstract and paper:  We study whether and how climate-conscious institutional investors, i.e., institutions that join climate related investor initiatives, are decarbonizing their equity portfolios. Decarbonization could be achieved by re-weighting portfolios towards lower carbon emitting firms or targeted engagements with portfolio companies to reduce emissions. Our analysis suggests that portfolio re-weighting is the predominant strategy used by climate-conscious institutions to green their portfolios, in particular by investors based in countries with carbon emissions pricing schemes. Institutions also rely on engagement, particularly following 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 generating more green revenues. Overall, our analysis raises doubts about the effectiveness of investor-led initiatives in reducing corporate carbon emissions and helping take necessary action to tackle climate change for an all-economy transition to “green the planet”.

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Co-ordinator: Kenny Phua

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