Decarbonizing Everything

Cheema-Fox, Alexander and LaPerla, Bridget Realmuto and Serafeim, George and Turkington, David and Wang, Hui, Decarbonizing Everything (15 July, 2021). Financial Analysts Journal, 2021, 77(3): 93-108. DOI: 10.1080/0015198X.2021.1909943.

17 Pages Posted: 7 Jan 2021 Last revised: 21 Jul 2021

See all articles by Alexander Cheema-Fox

Alexander Cheema-Fox

State Street Associates

Bridget Realmuto LaPerla

State Street Associates

George Serafeim

Harvard Business School

David Turkington

State Street Associates

Hui (Stacie) Wang

State Street Associates

Date Written: January 28, 2021

Abstract

We analyze how the use of different climate risk measures leads to different portfolio carbon outcomes and risk-adjusted returns. Our findings are synthesized in a rules-based investment framework, which selects a different type of climate metric across industries and weighs industries in the portfolio based on the variability of carbon outcomes among firms within each industry. We conclude that analyzing the merits and applicability of various climate data can help investors manage climate risk while increasing risk-adjusted returns.

Keywords: climate change, investments, factor investing, ESG, environment, climate finance, decarbonization

Suggested Citation

Cheema-Fox, Alexander and LaPerla, Bridget Realmuto and Serafeim, George and Turkington, David and Wang, Hui, Decarbonizing Everything (January 28, 2021). Cheema-Fox, Alexander and LaPerla, Bridget Realmuto and Serafeim, George and Turkington, David and Wang, Hui, Decarbonizing Everything (15 July, 2021). Financial Analysts Journal, 2021, 77(3): 93-108. DOI: 10.1080/0015198X.2021.1909943. , Available at SSRN: https://ssrn.com/abstract=3693941 or http://dx.doi.org/10.2139/ssrn.3693941

Alexander Cheema-Fox

State Street Associates ( email )

140 Mount Auburn St
Cambridge, MA 02139
United States

Bridget Realmuto LaPerla

State Street Associates ( email )

One Lincoln Street
Boston, MA 02111-2900
United States

George Serafeim

Harvard Business School ( email )

Boston, MA 02163
United States

HOME PAGE: http://www.hbs.edu/faculty/Pages/profile.aspx?facId=15705

David Turkington

State Street Associates ( email )

United States

Hui Wang (Contact Author)

State Street Associates ( email )

140 Mt Auburn St
Cambridge, MA 02138
United States

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