“Brown” Risk or “Green” Opportunity? The dynamic pricing of climate transition risk on global financial markets
用行业/技术分类衡量企业气候转型风险，发现绿色股票在时间序列上显著跑赢棕色股票，年超额收益约20%，且巴黎协定后加速；同时构建了棕色减绿色因子，初步显示其在截面中被负向定价。
There is mixed evidence about the pricing of climate transition risk on financial markets. I contribute to this debate methodologically by measuring firms' climate transition risk with a sector/technology classification. Thereby, I complement approaches relying on contested ESG and incomplete CO2 data. Moreover, I contribute empirically by comparing the pricing of brown and green pure-play companies in the time-series and cross-section. By focusing on companies' technologies, I find that green stocks outperform significantly in the time-series. The annual outperformance of green vs. brown stocks of ∼20 % is higher than previous estimates and very robust. Interestingly, the green outperformance accelerated after the Paris Agreement, suggesting that green stocks benefited from an unexpectedly strong increase in transition risk concern. I also calculate a technology-based Brown Minus Green Factor, which exhibits low correlations with other factors. Using the Fama and MacBeth (1973) procedure, I find initial evidence that the factor is negatively priced in the cross-section of returns. Through propensity score matching, I finally show that brown firms carry substantially higher forward-looking dividend yields, indicating that investors expect higher payouts for holding riskier assets. • I combine a sector/technology classification for transition risk with financial factor models. • Time-series results show a very robust green outperformance. • E-scores and emission-based portfolios underperform technology-based portfolios. • Cross-sectional results highlight preliminary evidence of a BMG factor. • Brown firms must pay higher dividend yields compared to green firms.