PT  - JOURNAL ARTICLE
AU  - Christian Walkshäusl
TI  - Carbon Momentum
AID  - 10.3905/jesg.2021.1.023
DP  - 2021 Jul 01
TA  - The Journal of Impact and ESG Investing
PG  - jesg.2021.1.023
4099  - https://pm-research.com/content/early/2021/07/01/jesg.2021.1.023.short
4100  - https://pm-research.com/content/early/2021/07/01/jesg.2021.1.023.full
AB  - A company’s long-term average carbon emission growth rate, or carbon momentum (CM), is a significant predictor of future stock market and fundamental performance in international equity markets. Investors demand significantly higher expected returns from high-CM companies than from low-CM companies that continuously reduce their carbon emissions, as high CM hurts future fundamental profitability. The observed CM premium represents a separate source of compensation that is largely unexplained by established financial risk factors of common asset pricing models in the period after the Paris Agreement. CM holds unique information about a company’s carbon emission behavior that is independent from alternative measures, such as total emissions and emission intensity.TOPICS: ESG investing, global markets, analysis of individual factors/risk premia, performance measurementKey Findings▪ Investors demand higher expected returns from companies with high carbon momentum (CM) relative to companies with low CM in international equity markets.▪ High CM has a negative impact on a company’s future fundamental performance.▪ CM holds unique information about a company’s carbon emission behavior that is independent from alternative measures, such as total emissions and emission intensity.