Working Paper: NBER ID: w28226
Authors: Stefano Giglio; Bryan T. Kelly; Johannes Stroebel
Abstract: We review the literature studying interactions between climate change and financial markets. We first discuss various approaches to incorporating climate risk in macro-finance models. We then review the empirical literature that explores the pricing of climate risks across a large number of asset classes including real estate, equities, and fixed income securities. In this context, we also discuss how investors can use these assets to construct portfolios that hedge against climate risk. We conclude by proposing several promising directions for future research in climate finance.
Keywords: climate change; financial markets; climate risk; asset pricing; green investments
JEL Codes: G0
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| climate change (Q54) | economic performance (P17) |
| climate risk mitigation (Q54) | financial market behavior (G40) |
| climate risk factors (Q54) | asset pricing (G19) |
| climate disasters (Q54) | economic activity (E20) |
| economic activity (E20) | climate risk (Q54) |