Two new bets against carbon risk: Do investors care?

Mark Hulbert finds irony in the timing of S&P Dow Jones Indices’ announcement of new climate-focused benchmarks for the eurozone equity market.

By Mark Hulbert

(About the author: Mark Hulbert is an author and financial markets columnist. He is the founder of the Hulbert Financial Digest and his Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at

CHAPEL HILL, N.C. (Callaway Climate Insight) — There is considerable irony in the timing of S&P Dow Jones Indices’ announcement this week of two new climate-focused benchmarks for the eurozone equity market.

That’s because the announcement came in the same week that the National Bureau of Economic Research began circulating research showing that the stocks of firms with higher CO2 emissions earn higher returns, not lower.

The two indices that S&P Dow Jones Indices (S&P DJI) just launched are the S&P Eurozone LargeMidCap Paris-Aligned Climate Index and the S&P Eurozone LargeMidCap Climate Transition Index. S&P DJI claims that the composition of these indices is consistent with the climate objectives contained in the “European Union (EU) Paris-Aligned Benchmark (PAB) and EU Climate Transition Benchmark (CTB) as specified by the EU Sustainable Finance Technical Expert Group (TEG),” to quote from the S&P DJI press release.

This NBER-released study, “Do Investors Care About Carbon Risk,” was written by Patrick Bolton, a professor of business at Columbia Business School, and Marcin Kacperczyk, a finance professor at the Imperial College London. In an interview, Kacperczyk stressed that their study is not a criticism of climate investing.

On the contrary, he said, one could view their findings as evidence of the success of the climate change movement in the investment arena. It’s precisely because of that success that investors are “demanding compensation for their exposure to carbon emission risk.”

Therefore, while this research doesn’t mean you shouldn’t invest in these new indices, you shouldn’t do so in the mistaken belief that your long-term investment returns will improve by doing so.

Photo: Bamberg, Bavaria. Reinhold Möller/Wikpedia.