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Publications
  • February 2023
  • Article
  • Journal of Portfolio Management

Climate Solutions Investments

By: Alex Cheema-Fox, George Serafeim and Hui (Stacie) Wang
  • | Pages:25
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Abstract

An increasing number of companies are providing products and services that help reduce carbon emissions in the economy. We develop a methodology to identify those companies and create a sample of publicly listed climate solutions companies allowing us to study their geographic composition, accounting fundamentals, valuation ratios, and stock performance over time. The sample is equally split between developed and emerging markets with more companies located in China rather than the US or the EU. A portfolio of climate solutions companies exhibits higher revenue growth, higher investments in research and development, and talent and lower profitability margin. The portfolio exhibits superior stock market performance since 2018, driven by solutions in energy, fuels, battery, and transportation. Finally, the portfolio’s returns exhibit very little correlation with the returns of portfolios that seek to reduce their carbon emissions by underweighting high carbon emission companies, suggesting that climate solutions portfolios are distinct from low carbon emission indices.

Keywords

Decarbonization; Climate Finance; Climate Impact; Climate Risk; Environment; Sustainability; Carbon Emissions; Electric Vehicles; Energy; Renewables; Climate Change; Corporate Social Responsibility and Impact; Environmental Sustainability; Emerging Markets; Investment Portfolio

Citation

Cheema-Fox, Alex, George Serafeim, and Hui (Stacie) Wang. "Climate Solutions Investments." Journal of Portfolio Management 49, no. 3 (February 2023): 72–96.
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About The Author

George Serafeim

Accounting and Management
→More Publications

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    Northvolt: Building Batteries to Fight Climate Change (B)

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    Climate Solutions, Transition Risk, and Stock Returns

    By: Shirley Lu, Edward J. Riedl, Simon Xu and George Serafeim
More from the Authors
  • Vytal: Packaging-as-a-Service By: George Serafeim, Michael W. Toffel and Stacy Straaberg
  • Northvolt: Building Batteries to Fight Climate Change (B) By: George Serafeim, Debora L. Spar, Peter Tufano, Hugo Etchegoyhen and Emilie Billaud
  • Climate Solutions, Transition Risk, and Stock Returns By: Shirley Lu, Edward J. Riedl, Simon Xu and George Serafeim
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